GBP/USD Extends Higher and is on Pace to Post a Fifth Straight Day of Gains

The British pound has rallied against all of its major counterparts in the week thus far. The pound to dollar exchange rate has benefited from a weaker dollar and encouragement that the UK is willing to go to lengths to help the economy recovery from the negative impacts of the Coronavirus.

Chancellor Rishi Sunak delivered his summer statement which contained further easing measures such as a cash bonus for companies to hire trainees and an incentive to keep companies from letting go of staff. There was also a scheme to encourage citizens to dine out in August and a VAT cut for certain sectors.

The greenback briefly dipped to lows not seen in 4-weeks in early day trading as equities have bounced back. The S&P 500 (SPY) closed for a three-quarters percent gain on Wednesday, wiping out losses from the prior day.

Volatility may slow into the US session as the economic calendar is relatively light for today. The main focus will be on the weekly US jobless claims report which is expected to show 1.4 million new people filing for unemployment benefits.

Technical Analysis

GBP/USD has shown strong momentum after the early week break above major resistance at 1.2500. The pair now faces a hurdle near 1.2650 that had held it lower twice in April, each time leading to a notable decline.

In addition to the horizontal level, the 200-day moving average has once again come into play. The indicator currently resides at 1.2687, slightly higher from where it was in April.

Aside from a brief rally above the moving average in June, the pair has not been able to trade above it on a sustained basis since March.

The 1.2650 area will be in focus during the US session. This level could cause the pair to pare back some of its recent gains.

Bottom Line

• GBP/USD has extended higher to resistance at 1.2650 which has been a major hurdle for the pair in the past.
• Sterling is outperforming the majors as investors are encouraged by the continued efforts from the UK government to get their economy on track.

For a look at all of today’s economic events, check out our economic calendar.