GBP/USD Forecast: Weaker USD Pushes Pound to 6-Week Top at 1.35
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- GBP/USD surges to its highest level since November 19th after experiencing the biggest daily rise in a week.
- Prime Minister Johnson pushed for a further decline in activity despite record rates of Coronavirus infection.
- Truss’ willingness to keep the Article 16 threat on the table and the new Brexit laws challenge the bulls.
The GBP/USD forecast is bullish as the price trades around 1.3485-90 during Thursday’s Asian session after hitting a multi-day high of 1.3499 the previous day.
Other major currency pairs have also welcomed the widespread US dollar weakness while ignoring the threats posed by the South African variant of Covid, Omicron, and Brexit.
The US dollar index (DXY) fell the most in a week on Wednesday, hitting a 1-month low at 95.88. This could be due to a rally in US Treasury yields and disappointing data.
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By the end of the North American session on Wednesday, the 10-year US Treasury yield reached a monthly high of around 1.557 %, increasing 7.6 basis points. The reason for the decline is likely the disappointment following the weak auction of 7-year bonds. Reuters reported that seven-year bonds were sold at a high yield of 1.48 percent, about two basis points higher than they were trading before the auction.
On Wednesday, 183,037 cases of daily coronavirus infection were reported in the UK. However, Reuters reported on the Covid data that Boris Johnson would not impose any new restrictions in England this year to contain the spread of Omicron, which is currently responsible for 90% of all infections among the general public, health officials said. “Sky News is putting new pressure on UK Prime Minister Johnson to shorten the lockout period for positive cases. COVID wants to extend the lockout up to five days to protect the National Health Service,” they said.
Maros Sefcovic, vice president of the European Commission, has warned of a no-deal Brexit if the UK continues to threaten activation under Article 16 next year. The new Brexit laws, which will take effect early in 2022, also raised concerns about food shortages.
It should be noted that unfinished home sales declined from + 0.5% to -2.2% m/m in November, and the Good Trade Balance posted a deficit of -97.8 billion dollars versus – $ 83.2 billion in November.
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Even in the face of a year-end liquidity crisis and a lack of key data/events, the GBP/USD market was able to maintain recent growth momentum. As for the US Weekly Jobless Claims Index and Chicago Purchasing Managers’ Index for December, those are expected to come in at 205,000 and 62, respectively, instead of 205,000 and 61.8.
GBP/USD price technical forecast: Bulls preparing for a breakout
The GBP/USD price hits near the 1.3500 swing high area, a resistance level holding for several weeks. The volume is quite high for the recent upside momentum, showing the probability of further rise. The average daily range is 29%, which is almost normal for the pair during the Asian session.
