GBP/USD: Fed has potential to turn cable back down

The GBP/USD pair has been recovering amid Britain's vaccine rollout, hopes the disease is peaking and Bailey's bullish comments but the greenback has room for a comeback that may turn cable back down, according to FXStreet’s Analyst Yohay Elam. 

See – GBP/USD to retest 1.3710/20 on a break above 1.3636/71 – Credit Suisse

Key quotes

“Prime Minister Boris Johnson's pledge to boost the vaccination campaign is bearing some fruit. Over two million people have received at least one coronavirus immunization dose – more than all of continental Europe combined. A relatively rapid exit from the crisis is boosting the pound.”

“According to borough-level data, the number of cases in London may have peaked. These are only tentative signs, but it seems that the strict lockdown and pleas from doctors to respect the rules are having some impact. Additional data – such as that coming in the afternoon for the whole country – is needed to add to optimism.”

“It seems that the Bank of England would favor expanding its bond-buying scheme rather than sub-zero borrowing costs, which weigh on the pound.” 

“Federal Reserve officials have been dismissing the need to taper the scheme, but merely talking about tightening rather than discussing more accommodation is a positive sign for the greenback. Lael Brainard, a Governor at the Federal Reserve, speaks later in the day. She may join the chorus in expressing optimism about the post-pandemic economy and hint about moving out of stimulus. That has the potential to end the current GBP/USD rally.”