GBP/USD Daily Forecast – 1.25 Handle in Sight as Investor Optimism Drives Dollar Down

Investors have felt optimistic this week with several countries reporting a decline in new virus cases and setting out plans to reduce lockdown restrictions.

This has led to a further rally in the equity markets with the S&P 500 breaking to a fresh nine-week high in early trading today. Meanwhile, assets that are viewed as a safe-haven, such as gold and the dollar, have pared recent gains.

Reuters reported earlier today that the number of Coronavirus deaths in the UK was significantly higher than originally reported by the governments on April 17.

The Office for National Statistics revised up their figures to indicate more than 21 thousand people died as of April 17, up from nearly 14 thousand originally reported. This includes more than seven thousand people that died in care homes.

The economic calendar is relatively light in the session ahead. Consumer confidence figures will be released from the US later in the day. However, investors are likely to wait until Wednesday’s GDP figures before making any big moves in the markets.

Analysts expect that growth in the US may have fallen by an annualized 3.9% in the first quarter after having risen 2.1% in the prior reading.

Technical Analysis

A broadly weaker dollar is driving the currency markets and the greenback is once again seen declining against all of its major counterparts.

The trade-weighted dollar index was last seen testing the same horizontal level that held it lower last year which could draw some buyers.

GBP/USD shows strong upward momentum after breaking above a horizontal level at 1.2439 earlier today. The next upside target for the pair comes in at 1.2521. The level stands to cap the pair over the next 24 hours as there is typically a slowing of volatility ahead of major data releases.

Support ahead of Wednesday’s GDP reading is seen at the prior resistance level of 1.2439.

Bottom Line

• GBP/USD continues to gain as the dollar is set to post a third straight day of losses.
• US consumer confidence figures will be released later in the day although investors are more likely to take on more meaningful positions following GDP data scheduled for release tomorrow.