British Pound (GBP) Outlook: GBP/USD Strength Likely to Resume
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GBP price, news and analysis:
- Tuesday’s US inflation data will likely dominate trading near-term but once the figures have been absorbed GBP/USD is well placed to advance.
- The UK reopened Monday, a key vaccination target has been reached and GDP data for February were better than analysts had expected.
GBP/USD well placed to advance
US inflation figures due at 1330 London time will likely dominate Tuesday’s FX trading but once they are out of the way GBP/USD is in a good place to gain ground. Non-essential shops, pubs, gyms and hairdressers all reopened in the UK Monday and that should boost the economy.
Moreover, the UK has hit its target of offering a Covid-19 vaccine to all over-50s a few days early and February GDP data released ahead of the opening of European trading were better than analysts polled by the news agencies had predicted.
Note that the US Dollar has traded broadly sideways for the past week but GBP/USD, which hit a recent high of 1.4242 on February 24 before easing back, has stabilized this week and is showing signs of rallying.
GBP/USD Price Chart, One-Hour Timeframe (April 1-13, 2021)
Source: IG (You can click on it for a larger image)
Caution is called for, however, as IG client sentiment data are currently sending a bearish signal due to a sharp rise in long positions. The retail trader data shows 64.43% of traders are net-long, with the ratio of traders long to short at 1.81 to 1. The number of traders net-long is 8.74% higher than Monday and 47.57% higher than last week, while the number of traders net-short is 3.25% higher than Monday but 23.35% lower than last week.
At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may fall. Moreover, traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives a stronger GBP/USD-bearish contrarian trading bias.
--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.