GBP/USD Resumes Advance as England Enters Lockdown

GBP price, coronavirus news and analysis:

  • England is to enter lockdown from Wednesday, with similar moves introduced by the other UK nations.
  • Traders see this as a positive reaction to rising Covid-19 infection levels, helping GBP/USD to recover some of Monday’s losses and resume its uptrend.

GBP/USD uptrend resumes

GBP/USD is modestly firmer in early European trading Tuesday, recovering some of Monday’s steep losses and suggesting that the upward trend in the pair is still in place.

GBP/USD Price Chart, One-Hour Timeframe (December 28, 2020 – January 5, 2021)

Source: IG (You can click on it for a larger image)

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England entering lockdown, vaccines and Georgia Senate race in focus

The latest move seems to be a reaction to news that England is to enter lockdown again from Wednesday, with similar moves introduced by the other UK nations: Scotland, Wales and Northern Ireland. The Covid-19 vaccine rollout in the UK also seems to be supportive of GBP.

However, a more important driver of the pair could be the results of the two runoff elections in Georgia that will decide control of the US Senate. If both seats are won by the Democrats, President-elect Joe Biden’s party will have control of both houses of Congress, helping him to introduce new legislation.

The likely reaction in USD to the results is unclear but it could weaken if the Democrats win both seats as they would likely introduce a larger fiscal stimulus program that would also reduce safe-haven demand for the US currency.

For GBP/USD this could mean a rally back to Monday’s highs just above 1.37, with near-term support at Monday’s low of 1.3542.

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily 4% -8% -3%
Weekly -21% 20% -2%

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— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

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