The British pound has edged lower in Tuesday trade. In the European session, GBP/USD is trading at 1.3842, down 0.27% on the day.
Dollar edges higher on COVID fears
The currency markets are in a holding pattern, as investors cast an eye to Friday, when the US releases Nonfarm Payrolls. The dollar index has managed a slight gain on Tuesday, rising 0.21% to 92.06. The British pound dropped below the 1.39 line overnight. With concerns growing over the resurgence of Covid in Europe, the UK, and Asia, risk appetite has fallen, which has pushed the US dollar slightly higher. If pandemic blues worsen, the greenback could add further gains.
On the data calendar, UK releases are limited to tier-2 events. Net Lending to Inpiduals is expected to rise sharply to GBP 6.9 billion in May, up sharply from 2.9 billion previously. A strong jump would point to an increase in economic activity, with consumers taking on more credit. On Wednesday, the UK releases GDP for Q1, which is expected to show contraction – the consensus is -1.5% m/m and -6.5% y/y. These second estimate readings are expected to confirm the initial estimates, which means the pound’s reaction should be muted unless the forecast is wildly off target.
In the US, consumers remain optimistic about economic conditions. The CB Consumer Confidence index is projected to accelerate in June, with a forecast of 119.0, up from 117.2 beforehand. This confirms the trend seen on Friday from UoM Consumer Sentiment, which rose in June to 85.5, up from 82.9 previously. The UoM report found that with the US recovery in full swing, close to 75% of consumers surveyed expect interest rates to rise in 2022. This was the highest proportion since 2018.
GBP/USD Technical Analysis
GBP/USD Daily Chart
- There is resistance at 1.3993, protecting the symbolic 1.40 level. Above, there is resistance at 1.4105
- On the downside, 1.3778 is the first level of support. This is followed by a monthly support line of 1.3675