GBP/USD : Modest Rally

(Thu, 7 Jan 2021). The US Dollar looks to be steadying in early European business Thursday, weakening pairs such as GBP/USD, EUR/USD, AUD/USD and NZD/USD. However, market optimism remains intact despite the riots in Washington DC, suggesting further Dollar weakness ahead as traders leave the safe-haven currency and US Treasuries, and resume buying of assets seen as riskier such as Sterling.

GBP/USD HIT BY MODEST RALLY IN USD

The British Pound and many other currencies are a tad weaker in Europe early Thursday thanks to a modest recovery in the US Dollar. However, the downward trend in the safe-haven USD looks likely to resume soon as market optimism about the future remains intact.

While the steadying of the US Dollar after its recent losses is no surprise given Wednesday’s riots in DC and its role as a safe haven, there are several factors that could prompt a further risk rally. The apparent victory by the Democrats in Georgia increases the chances that President-elect Joe Biden will be able to push through big borrowing and big spending measures that would lead to more economic growth.

Moreover, hope remains intact that vaccines will eventually conquer Covid-19 and that investors will look past the DC riots into a somewhat brighter future.

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