Pound rallies on weakening dollar

by Jul 31, 2020Market Reviews

Pound rallies on weakening dollar

GBP/USD broke 1.30 today, a critical resistance that signals a strong bullish sentiment on the Pound as the dollar weakened on the Fed, sending full message support. Jerome Powell stated that they would keep all support lines open, including bond-buying, low-interest rates, and central bank dollar swaps. Jerome Powell emphasized, “[the fed] is not thinking about thinking about thinking about raising rates.” Andrew Slimmon, Senior Portfolio Manager at Morgan Stanley, stated that the “Fed would keep supporting risk assets.”, suggesting that it would be an excellent time to be long in risk assets.

The rally in the pound comes when the UK still has a 7-day average Coronavirus case figure of around 737, with cases continuing to rise. This number is 26% more since 16th July. On Thursday, there were 846 new Coronavirus cases, the highest since 28th June. This conveys the UK is not fully controlled the Coronavirus.

Boris also faces the issue of Brexit, with a transition deadline expiring on 31st December. The pandemic has made this difficult, dragging the Brexit negotiations on for five years now. The pounds’ strength amidst all the UK’s facing problems shows the strong sentiment of the dollar weakening.

The Euro also rallied against the USD on the weakening of the dollar. Like the Pound, it broke a strong key technical resistance of 1.18. However, like the UK, the continent is experiencing spikes in Coronavirus cases in Spain and Germany. Spain received the largest rise in daily cases since June, booking over 1,200 infections. Similarly, in Germany, sees 902 new Coronavirus cases, up from 684 just a day ago.

The rally in the Euro comes on the back of many tailwinds, such as 750 Billion Euro package and relatively successful handling of the Coronavirus across Europe.

Anish Lal did some excellent technical analysis on the GBP/USD. You can watch it here.

 

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