GBP/USD : Steady

(Tue, 12 Jan 2021). After several days of losses, Sterling and other currencies are steadier against the US Dollar Tuesday and are well placed to move higher again.

That move lower, and the accompanying rally in the US Dollar, is looking increasingly like a healthy short-term corrective move in the main trend of a lower USD and gains for other currencies against it.

GBP/USD STEADIER WITH OTHER CURRENCY PAIRS

GBP/USD is steadier in early European trading Tuesday, suggesting that its decline over the last few sessions was a healthy short-term corrective move and that the main trend higher in the pair, in place since September 23 last year, will resume shortly.

The drop in GBP/USD and subsequent recovery has accompanied similar moves in other currency pairs such as AUD/USD, NZD/USD and USD/CAD without any real fundamental reason for the activity. While bears can point to political chaos in Washington and rising coronavirus infections, bulls can counter with the expectation of more US fiscal stimulus and vaccine rollouts.

On the subject of stimulus, several Fed officials have suggested that the US Federal Reserve could begin tapering its monetary stimulus program later this year, a negative factor for GBP/USD, and rising yields on US Treasuries are also boosting the US Dollar.

However, the flow of money out of Treasuries may have already run its course and attention this session will be on another batch of Fed officials due to speak, with traders waiting to see whether they too hint at a reduction in US monetary stimulus late this year.

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