GBP/USD Steady After Dropping to One-Week Low in Previous Session
After profit-taking drove weakness in the Pound Sterling during the previous session, the GBP is trading steady against its major peers – the US dollar and the Euro. At the time of writing, GBP/USD is trading at around 1.37, after weakening by 0.6% on Wednesday and falling to the lowest levels seen since a week.
After giving a strong performance through Q1 2021 despite the UK remaining in various stages of lockdown, the GBP turned weaker after investors indulged in profit-taking, causing it to turn bearish and lose some of its value against the USD and the EUR. In addition, GBP/USD also turned bearish on account of a strengthening in the USD over rising hopes for a quick economic recovery across the US.
Despite this momentary weakness, analysts are bullish about the prospects of the Sterling over rising hopes for the UK economy to post a faster rebound upon reopening shortly. Rapid rollout of the COVID-19 vaccines across the nation and pent-up demand among consumers lending a boost to the economy soon are the key reasons behind analysts’ optimism about GBP.
Hopes for rapid economic recovery have also weakened markets’ concerns that the BOE could consider cutting interest rates below zero. As the economy looks poised to rebound sharply from the coronavirus crisis, the need for monetary easing and dovishness from the central bank also reduce, improving the outlook for the UK currency.
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