This week’s economic calendar is dominated by the latest FOMC meeting on Wednesday with traders keen to see if the Fed gives any clues about interest rates going forward. US Treasury yields have been rising over the last few months, as investors continue to price in increased economic activity in the US, and while it is likely that the Fed will allow the economy to run hot in the near-term, any suggestion of higher inflation will see bond yields rise further.
The Bank of England will announce its latest policy decision on Thursday with all settings expected to be left untouched. As with the FOMC meeting, it is the accompanying narrative that needs to be closely followed, and with UK gilt yields also on the rise – the 10yr trades at its highest yield since July 2019 – Sterling may get another supportive bid.
The latest UK vaccination data is also Sterling-supportive with fatalities falling to a multi-month low while over 512k people received their first vaccination jab on Saturday, a multi-week high. The UK vaccination program is expected to increase further over the next few weeks with a further supply of vaccines now available with some reports that the vaccination rate may double soon.
GBP/USD remains in a longer-term uptrend but in the short-term, the pair may re-test the 50-day simple moving average (blue line) which has provided robust support over the last few weeks. This currently stands at 1.3830. A break and open above 1.4020 will be needed to turn the short-term sentiment positive.
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