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FX.co ★ Sterling edges up, GBP/USD observes a bullish trend

Sterling edges up, GBP/USD observes a bullish trend

The British pound had a very strong start in 2021 when it rallied on expectations that the accelerated vaccination would lead to a boom in the economy, and now GBP/USD bulls are glad they did not get rid of long positions due to the correction in February-March. In April, interest in buying sterling increased during the downturns, and the busy economic calendar for the week by the 23rd will confirm or deny this assumption. The market reaction to the release of data on employment, inflation, retail sales, and business activity of the UK may indicate whether buyers intend to restore the upward trend in the analyzed pair.

By mid-April, about 64% of the British population had received at least one injection, while 15% received two. From the 12th, the opening of shops and bars was allowed. Most restrictions will expire by June 21st. According to Bloomberg, the number of restaurant bookings and job postings has reached pre-pandemic levels. The citizens of the United Kingdom are ready to spend money. And they have something to spend. The head of the Bank of England, Andrew Bailey, expects a quick economic recovery, as, according to the regulator, households will use savings of £150 billion for purchases. Due to large-scale fiscal incentives, the share of household savings in the country's GDP exceeds 10%, which is one of the highest rates among developed countries.

Share of household savings in GDP

Sterling edges up, GBP/USD observes a bullish trend

According to 70 Reuters experts, the UK economy will expand by 5% in 2021 and 5.5% in 2022. The March forecast assumed an increase of 4.6% and 5.7%, respectively. Its rise for the current year is a "bullish" factor for the pound. According to experts, GDP contracted by 2.3% in the first quarter but will grow by 3.5% in the second and 3% in the third. Belief in the rapid growth of the indicator, coupled with the adaptation of the economy to Brexit, are pushing the GBP/USD quotes up. ING and UniCredit expect the pair to hit 1.4 in the week by April 23.

The weakening of the US dollar plays an important role in the rally in the analyzed pair. Despite strong macroeconomic statistics for the United States and expectations of US GDP growth for the rest of the year, this is helping the stock indices. The national currency suffers from rising stock prices due to its status as a safe-haven asset. The S&P 500 rally is likely to continue. Over the past three times, when 95% of the companies included in its calculation base traded above their 200-day moving averages (May 2013, September 2009, and December 2003), the stock index rose steadily over the next 12 months.

Thus, the weakening of the US dollar, rapid vaccinations in Britain, belief in the rapid growth of its economy, and adaptation to Brexit are pushing the GBP/USD quotes upward.

Technically, on the daily chart of the analyzed pair, the formation of the "Broadening Wedge" pattern and the implementation of the "Wolfe Wave" pattern continues. Longs opened from the level of 1.378 according to the recommendations from the previous material, I advise you to hold and increase on pullbacks. Targets for the upward movement should be 1.397, 1.412, and 1.417.

GBP/USD, Daily chart

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Sterling edges up, GBP/USD observes a bullish trend

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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