GBP/USD Price Forecast – British Pound Reaching Towards Highs Again

The British pound rallied a bit during the trading session on Friday as the nonfarm payroll numbers came out lighter than anticipated, as America added just 49,000 jobs for the month of January, as opposed to the 50,000 expected. Quite frankly, the slight miss was not the issue, it is just the fact that stimulus almost certainly has to be done in America yet again. That should benefit other currencies against the dollar, but there is also the other side of the trade to think about.

GBP/USD Video 08.02.21

After all, although stimulus could be bad for the US dollar in the short term, we have been down this road so many times in the past that one has to ask the question: “When does bad economic data and outlooks decrease risk appetite?” That is a real threat given enough time, because quite frankly stimulus packages seem to have less and less effect. Sooner or later, the economic reality comes back into the markets, and that could drive money into the US dollar in what might end up being a deflationary economy.

That being said, you can also make the argument that the British pound is relatively cheap from a historical standpoint and argue that it should be closer to the 1.50 level. I would not necessarily disagree, but that does not mean that we need to get there overnight. There are still a lot of questions when it comes to the British economy, as Brexit is still going to need to be observed as to the full effect. Beyond that, we have had massive lockdowns, and that of course cannot do anything good for the economy. On the other hand, the British seem to be headed most other places when it comes to vaccinations, so that goes into the column of “good for the Pound.” From a technical analysis standpoint, breaking above the 1.3750 level is necessary in order to get long again.

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