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Forex Market: GBP/USD hits a fresh two-week high on prospects of faster reopening of UK economy, Dollar awaits more catalysts

GBP/USD started the new week on a strong foot, while hitting a fresh two-week high, supported by prospects of a faster-than-expected reopening of the British economy and a potentially robust economic growth. At the same time, the possibility of a rate cut or the introduction of negative interest rates by Bank of England has already been priced out by the market.

The latest data showed that almost 30 million people in the UK had already received their first dose of a COVID-19 vaccine and more than 2.5 million people had received two doses.

Meanwhile, having registered its best quarterly performance against a basket of six major peers in nearly 3 years in Q1 2021, the US Dollar traded largely steady on Monday, with the DXY being at 93.053.

US employers in all sectors of the economy, excluding the farming industry, created more jobs than anticipated in March, an official government report showed on Friday, which is another sign the economy has begun to recover from the coronavirus pandemic-induced shock. Market players will now turn their attention to services sector data later on Monday, looking for confirmation of the economic rebound.

Some analysts expect the greenback to appreciate further, drawing support from an accelerating recovery and rising bond yields.

“I thought there would be a correction lower in the dollar, but that didn’t happen,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities, was quoted as saying by Reuters.

“The dollar’s upward trend is very strong. In the new quarter perhaps the best thing for investors to do is to just follow this trend,” Yamamoto added.

As of 9:26 GMT on Monday GBP/USD was edging up 0.27% to trade at 1.3855, after earlier touching an intraday high at 1.3869, or its strongest level since March 22nd (1.3877). The major currency pair has gained 0.57% so far in April, following a 1.05% drop in March.

In terms of economic calendar, today market players will be paying attention to the final data on US services sector activity for March by Markit Economics due out at 13:45 GMT as well as to the March report on non-manufacturing sector conditions by the Institute for Supply Management due out at 14:00 GMT.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 12.0 basis points (0.120%) as of 8:15 GMT on Monday, up from 10.9 basis points on April 2nd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3826
R1 – 1.3844
R2 – 1.3870
R3 – 1.3888
R4 – 1.3907

S1 – 1.3800
S2 – 1.3782
S3 – 1.3755
S4 – 1.3729

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