- GBP/USD rebounded from support at weekly lows in the 1.3670s and is currently rallying back towards the 1.3750 mark.
- The fact that the UK and EU have diffused vaccine tensions seems to have helped.
Despite the US dollar advancing against most of its G10 counterparts on Thursday, GBP/USD is nursing a pretty solid recovery, with GBP the best-performing currency in the G10 on the day. The pair rebounded from support in the form of weekly lows around the 1.3675 area and is currently rallying back towards the 1.3750 mark. GBP/USD bulls will likely be eyeing resistance in the form of the 5 March lows at just under 1.3780, ahead of a test of the 50-day moving average that the pair tanked below earlier in the week at 1.3827.
Driving the day
It is not abundantly clear why GBP is outperforming to such as extent this Thursday, but the fact that it looks as though the UK and EU are going to work something out on vaccines does seem to have helped; for reference, the EU and UK released a joint statement on Wednesday saying they were jointly looking at how to increase vaccine productive capacity and create a win-win situation. As a result, some might be hoping the EU does not now resort to blocking vaccine exports to the UK, something which would likely have been taken as a GBP negative.
Elsewhere, technical selling in the EUR/GBP cross also appears to be giving GBP a broader boost; for reference, EUR/GBP, which was trading at two-week highs around 0.8640 at the start of Thursday’s European session, has now dropped all the way back to the 0.8570s, where it now resides only about 30 pips above recently printed multi-month lows.
Clearly, EUR/GBP’s modest rally between Monday and early Thursday (where it rose from under 0.8600 to the aforementioned two-week highs) has been seen by sterling bulls as an opportunity to sell. Indeed, the economic outlook remains supportive of further downside, with the EU heading back into lockdown to contain a third wave (France just put three additional regions under strict lockdown) while Covid-19 cases and death rates continue to drop in the UK – expectations are for a much swifter economic recovery in the UK than in the EU in 2021 and thus disparity is reflected in the difference in tone between BoE and ECB officials, another factor weighing on EUR/GBP (and seemingly helping GBP/USD on Thursday).