The UK and EU are likely to continue their post-Brexit arguments after UK negotiator Lord Frost said that the EU should ‘shake of any ill will’ towards the UK for leaving the single block and hoped instead that the EU ‘build a friendly relationship between sovereign equals’. The EU is upset that the UK unilaterally decided to delay checks on goods entering Northern Ireland from Great Britain with the single block expected to launch legal proceedings shortly. In his open letter to The Sunday Telegraph Lord Frost added that the EU’s recent warning that they would block vaccine exports to the UK had significantly damaged trust between the two sides.
The Bank of England governor Andrew Bailey will be speaking shortly at the Resolution Foundation about the current economic outlook and while his speech may contain nothing new, it will be interesting to hear if the central bank is worried about the recent rise in global bond yields and if he is worried about inflation picking up sooner rather than later. Governor Bailey speaks at 10:00 GMT.
GBP/USD is currently just above 1.3800 in early turnover, pushed lower by a resurgent US dollar and higher US bond yields. The 10-year UST yields a fraction under 1.60% and is likely to push higher on fresh inflation concerns after the Senate passed the USD1.9 trillion covid-19 relief bill. Sterling remains reasonably well supported against a range of other currencies but is struggling against the US dollar. EUR/GBP is below 0.8600 and at a one-year low, while GBP/JPY is back above 150 and close to last week’s three-year high.
After trading at a multi-year high of 1.4377 in late-February, GBP/USD has sold-off sharply, touching 1.3776 last week. The bullish trend from early May last year remains in place and the pair are currently being propped up by the 50-day simple moving average which has held firm since late November. The CCI reading shows the pair in oversold territory for the first time since early December and this may help to stem, or at least slow down any further sell-off.
GBP/USD DAILY PRICE CHART (JUNE 2020 – MARCH 8, 2021)
Retail trader data show 53.73% of traders are net-long with the ratio of traders long to short at 1.16 to 1. The number of traders net-long is 10.38% higher than yesterday and 6.88% higher from last week, while the number of traders net-short is 7.91% higher than yesterday and 10.32% lower from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.