The pound-dollar pair is crawling towards the 40th figure after another unsuccessful attempt to storm the 1.4000 mark. The pound is not too stubborn: over the past two months, GBP/USD bulls have tested the impregnable price barrier at least ten times. The bulls retreated by 100-200 points, licked their wounds and re-entered the battle. The GBP/USD pair is kept afloat not only due to the general weakness and vulnerability of the US dollar, but the pound is also showing character, whipping up interest in itself. Moreover, the British macroeconomic reports that were published last week, for the most part, were better than forecasts. The UK economy is gradually recovering, despite the fact that quarantine is still in place (although restrictions began to be phased out last month).
By the way, last week we received the February data on the labor market (i.e., when the strict lockdown was in effect) - but even during this period, unemployment still showed a downward trend - to the surprise of analysts and traders. So, the indicator fell to 4.9%, with a forecast of growth to 5.1%. The level of average earnings (excluding bonuses) increased to 4.4%. The indicator has been consistently growing since August 2020. The British consumer price index showed a minimal, albeit growth in March: +0.3% on a monthly basis (from the previous value of 0.1%), and +0.7% on an annual basis. The main consumer price index recovered to 1.1% (from the February value of 0.9%). The cherry on top was the UK retail sales report. The March figures came out in the green zone – both taking into account fuel costs, and without this component. Both indicators have updated the annual high.
Coronavirus factors are also on the pound's side. In particular, over the past week, the death rate from COVID in the country decreased by 26%, and the number of hospitalizations by 19%. Last month, the coronavirus ceased to be the main cause of death in the country, losing this sad palm to dementia and cardiovascular diseases. The COVID vaccination campaign is not slowing down: in Britain, 25% of the adult population has already received both (!) doses of coronavirus vaccinations. The first dose was received by almost 35 million people – more than half of the adult population. Against the background of such trends, the British authorities are gradually easing quarantine restrictions. The last step in this direction was made on April 12, and the next one is scheduled for May.
Such a fundamental picture makes it possible for the pound to "hold the line" and settle at the 40th figure. At the same time, the pound actually ignored the political scandal that broke out yesterday in the UK. So, according to the BBC, last autumn, when the government discussed the possible introduction of another lockdown in the country, Prime Minister Boris Johnson categorically opposed this measure and uttered the phrase "it is better to let a pile of thousands of bodies grow". The British media circulated this information and so the pound stopped rising, even against the dollar.
But, as you know, such information do not live long: journalists refer to anonymous sources, there is no objective evidence, and the prime minister himself, of course, denies everything, saying that he did not say anything like that. In other words, it is impossible to talk about any political consequences in this case: the accusations made by the press look too strained and unfounded. That is why the pound, after a short pause, resumed its upward offensive.
In turn, the dollar continues to ignore macroeconomic reports. In particular, today the greenback ignored the US indicator of consumer confidence. Although the release exceeded all expectations: with a forecast of growth to 113 points, the indicator jumped to 121 points, showing the best result since February last year. The indicator has been consistently growing for the past four months. The greenback's reaction (or rather, the lack of reaction) suggests that dollar bulls are in standby mode, ignoring all other fundamental factors. It seems that the members of the Federal Reserve convinced the market in advance that the spasmodic growth of key macroeconomic indicators in the United States will be temporary.
In early April, Fed Chairman Jerome Powell once again said that the central bank would allow the economy to "overheat" and would not resort to retaliatory measures. Later on, his colleague - Christopher Waller - added that the Fed members would "only welcome" the excess of the two percent inflation level, but at the same time would not allow the acceleration of inflation to the three percent level. Similar rhetoric was voiced by other Fed representatives. Apparently, the central bank will indicate its position again at the April meeting, which is that the Fed does not intend to curtail QE and (especially) raise the interest rate, despite the growth of key macroeconomic indicators.
Thus, the current fundamental background for the GBP/USD pair indicates the priority of longs. The intermediate target of the upward movement is the 1.3950 mark – this is the upper limit of the Kumo cloud on the daily chart. The main target is the round mark of 1.4000, which corresponds to the upper line of the Bollinger Bands indicator on D1.
