Bulls eye 1.3750 amid easing EU-UK vaccine row, stimulus hopes


  • GBP/USD eases from intraday high as bulls catch a breather after a 130-pip rise in the last four hours.
  • UK is out of the list of countries to witness tighter covid vaccine export restrictions produced in the EU.
  • 600,000 jabs a day, receding virus numbers and US President Joe Biden’s call to Republicans for stimulus battle market frenzy.
  • UK Final Manufacturing PMI, US ISM Manufacturing PMI will decorate the calendar, risk catalysts remain as the key.

Despite recently stepping back from the day’s high of 1.3739 to 1.3731, GBP/USD stays on the bull’s radar with 0.24% intraday gains while heading into Monday’s London open. The Cable eyes further gain as the European Union (EU) refrains from putting the UK on the export restriction list while chatters over further easing from the UK and the US also help improve the mood ahead of the key PMI data.

EU President Ursula von der Leyen’s comments suggesting additional 900,000 covid vaccines for the bloc seems to be the cause of Brussels’ readiness to keep the UK free of its list containing multiple countries where the export of jabs will have additional filters. The Guardian puts it as, “The UK has been left off a list of more than 120 countries exempted from tighter export restrictions on vaccines produced in the EU, in the latest twist in the bloc’s row with AstraZeneca over a shortage of doses.”

Also on the positive side could be the UK’s 600,000 vaccinations a day and recently easing virus numbers from Britain. It should be noted that optimism surrounding British Trade Secretary Liz Truss’s ability to gain the best trade deal from the US and chatters over American stimulus also favored the risks. Additionally, the Financial Times’ stated UK PM Boris Johnson and Chancellor Rishi Sunak prepare for anticipated recovery with a “pre-Budget recovery plan”, which helped brighten the risks. Furthermore, US President Joe Biden’s call to discuss the much-awaited aid package with 10 Republicans eyeing a $600 billion budget, versus $1.9 trillion, add optimism to the mood.

On the contrary, talks on the social media platform for silver’s rally and likely further limitations on market joined Irish Taoiseach’s push to placate the EU-UK vaccine row while challenging the risks. Furthermore, anti-lockdown protests in Brussels, Budapest and Vienna offer extra burden to the market sentiment but gain little attention.

Against this backdrop, stock futures reverse early-day losses while stocks in Asia-Pacific trade mostly positive. Further, the US 10-year Treasury yields also recover to 1.08% by press time.

Looking forward, UK’s final Manufacturing PMI for January, expected to reprint 52.9 figures, will precede the US ISM Manufacturing PMI for the previous month, likely to recede from 60.7 to 59.5, to entertain the GBP/USD traders. It should, however, be noted that the risk catalysts remain as the key.

Technical analysis

An ascending trend line from December 21, currently around 1.3680, holds the door for short-term GBP/USD sellers’ entry. Beyond that, the pair buyers keep targeting the 1.3800 threshold, with 1.3750 acting as an immediate hurdle.

 



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By Jonathan Prop

Jonathan Prop is an independent financial advisor. He has been working in finance for the last 20 years. After retiring early in his 40s, Jonathan decided to help others get to grip with financial markets, particularly his area of expertise - forex!

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