GBP/USD Daily Forecast – Upcoming Coronavirus Aid Package Puts Additional Pressure On U.S. DollarThe U.S. dollar loses ground against the British pound as markets hope that the new U.S. coronavirus aid package will provide major support to the economy.
Risk-On Mode In The Markets Helps British Currency
The British pound continues its rebound against the U.S. dollar and has already breached the 1.1800 level. The U.S. dollar is under pressure from the U.S. Federal Reserve’s unlimited quantitative easing and from the upcoming U.S. coronavirus aid package.
Early on Wednesday, the U.S. officials have told the press that an agreement on the huge economic stimulus bill has been reached. Massive aid for U.S. businesses and citizens boosts risk appetite and puts pressure on the U.S. dollar.
The exact details of the coronavirus aid package will be published later on Wednesday. It is expected to be worth as much as $2 trillion and contain aid to businesses and hospitals, as well as direct payments to U.S. families.
Wednesday will be a rather eventful day on the economic data front. Various measures of inflation, including Inflation Rate, Core Inflation Rate, PPI Output , Retail Price Index will be reported in Britain. In the U.S., traders will pay attention to Durable Goods Orders, which are expected to show a contraction of -0.8%.
Thursday will bring even more important economic data, as Bank of England will announce its rate decision. Analysts expect that the rate will stay unchanged at 0.1% as there’s almost no room for further cuts.
While the U.S. GDP Growth Rate would have traditionally been the most important data point for the day, Thursday’s Initial Jobless Claims will be in spotlight since they are expected to show a massive increase compared to the previous reading due to coronavirus containment measures.
GBP/USD breached the 1.1800 level and continues to move higher. The next major resistance for the pair is at 1.1930, near the high of the most significant rebound attempt after the major downside move in mid-March.
In case U.S. dollar weakness continues and GBP/USD manages to get past 1.1930, the 20 EMA at 1.2240 may serve as the ultimate goal for the current rebound. However, the situation is very fluid right now so traders will have to pay close attention to the sustainability of the current upside move.
On the support side, the previous resistance level at 1.1700 has become the new support which has already been tested by GBP/USD several times before it moved above 1.1800.