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GBPUSD - Surges Through 1.30 as BOE Official Says UK in a V-shaped Recovery

   

 

GBPUSD - Surges Through 1.30 as BOE Official Says UK in a V-shaped Recovery
 
In the last two weeks the GBPUSD has surged higher through two key levels to reach a five month high near 1.31. Just prior to the surge, it was meeting resistance at the key 1.2650 level, remaining within a narrow range consolidating between another key level of 1.25 and 1.2650. During this time, it has met some support from the 1.25 level. Several weeks ago it had also been well supported by another key level of 1.23 allowing it to return to back above 1.25, whilst the 1.25 level had offered some resistance during this time too.

Several weeks ago the GBPUSD fell sharply from a then three month high above 1.28 back down below the key 1.25 level, and in doing so, it returned to the range where it has spent the best part of the last four months. In the prior three weeks the GBPUSD rallied from a six week low below 1.21 back up to the key 1.23 level where it has met resistance however on this occasion it was able to push higher. It surged higher to 1.25 before breaking through to around 1.2650 which has now resisted prices on several occasions in the last two months, before pushing through to the three month high.

Generally the GBPUSD has spent the last four months consolidating around the key 1.25 level which has seen a healthy recovery from its sharp falls in early March. In the last week of March, it did very well to rally strongly and return to resistance at 1.25 before the recent range trading. In the two weeks prior, the GBPUSD dropped dramatically from above the key 1.30 level down to its lowest levels in 35 years below 1.15. Just prior to the dramatic falls, it had done well to rally back above another key level of 1.30 after applying pressure to this level, however for the most part of the previous four weeks, the sterling remained below this key level.

The 1.30 level had been a distant memory however the GBPUSD has now surged higher to return to that level and move straight through. It could have been expected to offer some resistance, however it now may provide some support to the GBPUSD.  For several months earlier in the year, the GBPUSD continued to trade around this key level showing no signs of breaking away in either direction. Throughout January the 1.30 level was under pressure as the GBPUSD eased away from a two week high above 1.32 on two occasions and both times looked poised to move lower through 1.30 before some support kicked in which has held it up well.

Somewhat controversial figure, the Bank of England’s (BOE) chief economist, Andy Haldane, believes the British economy is enjoying a V-shaped recovery, which flies in the face of many central bank officials who believe it is struggling and that unemployment will rise. Mr Haldane told MPs earlier in the week that the UK economy had been growing about 1% a week, on average, since May. “Roughly half of the roughly 25% fall in activity during March and April has been clawed back over the period since,” he said. “We have seen a bounce-back. So far, it has been a V. That, of course, doesn’t tell us about where we might go next.” Mr Haldane added that the UK economy has clawed back approximately half of the enormous contraction through March and April when the restrictions to combat the coronavirus pandemic were tightest. However fellow central bank official Silvana Tenreyro disagreed with the assessment asserting that the economy was struggling and would not fare much better in the coming months as social distancing rules continued and unemployment may increase. Ms Tenreyro said the threat of rising unemployment meant Britain’s economy was most likely going to have an incomplete V-shaped recovery.

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