The pound is slowly but surely recovering its positions. Less than a month ago – the GBP/USD pair reached a 35-year price low (1.1411) on March 20, but it remained at such lows for only a few days. After that, the British currency has been winning back point by point from the dollar for almost three weeks. With small pullbacks, the pair has passed more than a thousand points, and is now testing the 26th figure.
In general, the first working day after the Easter holidays was clearly not in favor of the US currency. The dollar index did not stay within 99 points – there was no trace of the former confidence of dollar bulls against the background of a decline in anti-risk sentiment. In turn, the British dollar is gaining momentum for the same reasons – the first positive signals from different parts of Europe suggest that the epidemic will soon go down and countries will remove the strict restrictions that have actually strangled many areas of business and industry. Good news came from China, where the trade balance exceeded forecasts. All these factors, like small puzzles, have formed into one solid fundamental picture, which allows GBP/USD not only to hold the won points, but also claim the 26th figure. However, first things first.
First of all, it should be noted that the situation with coronavirus remains difficult in the UK itself. More than 12,000 people died there from Covid-19, and the total number of infected people in the country is approaching 90,000. Today, it also became known that the number of deaths from the virus may be 15% higher due to the inclusion in statistics of new data on deaths in nursing homes. But even without these figures, the country is on the 5th place in the world in terms of the number of deaths, while in terms of the number of recoveries – on the 205th place. As you know, the head of government Boris Johnson survived, who spent three days in intensive care.
However, in recent days, there are signs that the spread of the coronavirus in the country has slowed, after which the UK authorities began talking about the fact that strict restrictions may soon be lifted – however, not before May 7. The emerging "light at the end of the tunnel" provided significant support for the pound.
In addition, similar news from Europe also encourages GBP/USD bulls. In particular, after a two-week quarantine in Spain, employees of factories, construction, security, telecommunications and customs were allowed to return to work. In Austria, small shops (up to 400 square meters), as well as specialized retail enterprises that produce and sell construction and gardening supplies, have resumed their work. In Italy, some stores have been allowed to operate – including stationery stores, bookstores and stores selling children's clothing. The list, of course, is small, but this is the first such relief for merchants after a long quarantine.
In Germany, the current isolation measures expire on April 19. Tomorrow, the German government will hold consultations with leading experts from the Academy of Sciences, as well as with the heads of all federal states. As a result of these consultations, the fate of the quarantine will be decided – either it will be removed very gradually, or it will be extended for a certain period. A similar situation has developed in Denmark, however, they have already decided to open kindergartens there. The quarantine measures in the Czech Republic have also been slightly relaxed.
The general situation was accurately described by the head of the Danish government, Mette Frederiksen. According to her, the heads of European states seem to be balancing on a tightrope - and you can't stop, and it's dangerous to act too quickly. At the same time, according to experts, the angle of inclination of the curves, which reflect new infections and the dynamics of deaths, began to decrease - both in the EU and in Britain. This circumstance provides quite strong support for the British currency (however, like the euro). But the US currency remained out of work: temporarily or for a long time - the question is open.
But the fact remains: the decline in anti-risk sentiment is clearly playing against the dollar. Even in the United States, where Covid-19 is at its fastest pace, Donald Trump has voiced optimistic notes, saying the country is "not going to get the worst case scenario." China also contributed to a decrease in panic - China exports in March fell by 6.6% year on year, while experts expected the March figure to be much lower - at -14%. Imports fell by less than one percent, while analysts had expected a slowdown of almost 10%.
Thus, the GBP/USD pair retains the potential for its further growth. When overcoming and consolidating the price above the "round" mark of 1.2600, one can consider long positions to the next resistance level of 1.2670 - this is the upper border of the Kumo cloud on the weekly chart.
