⏳ Final hours! Save up to 60% OFF InvestingProCLAIM SALE

GBP/USD Hits 3-Month High but Return of Brexit Boogeyman Will Cap Gains

Published 05/19/2021, 04:02 AM
© Reuters.
GBP/USD
-
CBKG
-

By Yasin Ebrahim

Investing.com – The pound soared to a three-month high against the dollar, riding on the coattails of reopening optimism, but the end of pandemic will bring the focus back on the Brexit effects that could halt cable’s run higher, according to an FX expert.

GBP/USD rose 0.39% to $1.4188. 

“Corona euphoria is continuing, but we remain Sterling sceptical,” Commerzbank (DE:CBKG) FX, EM Analysts You-Na Park-Heger said in a note. But with the end of the pandemic, market attention “will increasingly focus on the (negative) Brexit effects again, […] we see little scope for further Sterling appreciation,” Heger added.

The success of the vaccine rollout, with about 55% having already received the first dose, keeps the U.K. on track to lift all Covid-19 restrictions in about one month, and has helped strengthened the recovery, particularly in the labor market.

The U.K. reported Wednesday 46,000 job gains in March, taking the total to 102,000 jobs from the trough in January, suggesting the U.K. “may finally be turning a corner with further reopening effects ahead,” Scotiabank said in a note.

The optimism over the reopening has shielded sterling from remarks from Bank of England members, who in recent days have attempted to keep investor expectations grounded.

“Not even comments by Bank of England member Gertjan Vlieghe that the economy still needed a lot of stimulus and that the BoE would add negative interest rates to its toolkit in August was able to affect Sterling,” according to Heger.

The somewhat dovish remarks from Vlieghe arrive just weeks after delivered updated economic projections, forecasting growth of 7.25% this year, the fastest pace in more than 70 years.

The BoE also cut its weekly bond purchases to £3.4 billion from £4.4 billion in order to meet its unchanged £875 billion year-end target.

But the central bank was insisted that the slowing of its weekly bond purchases should not be viewed as a taper given its £875 billion bond holding target remains intact.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.