Fundamentally the US dollar is in a downtrend with Fed Chair Powell saying that US interest rates will not be raised ‘anytime soon.’ President elect Biden has also just proposed another $1.9 trillion support package and explained that he will return for another support package later in the year. The US has already pumped $3 trillion into the economy to counter the pandemic with the dollar index already falling 10% from its 2020 peak. With the additional support expected we suggest $ weakness will continue in the medium term.
The market is positive on sterling at the moment after the agreement of a UK/EU trade deal and the quick implementation of the vaccine programme. In the short term this is supporting GBPUSD. However, in the medium term we suggest that the effects of Brexit will weigh upon the pound. Having said this any dips in GBPUSD will probably be shallow and short-lived because of ongoing $ weakness.
Please note that technical analysis is a reflection of the fundamental situation. Fundamentals are subject to event risk (change without advance notice) and as such will change when events occur.
