Forex Market: GBP/USD hits a fresh 34-month high on UK vaccine roll-out success, Dollar pressured by recovery pace doubts

GBP/USD rose to a fresh 34-month high on Monday, as market players doubted whether US recovery from the pandemic-induced shock would be as fast as anticipated, which pressured the US Dollar.

The Sterling has also drawn support from the success of the UK government’s vaccination program. Reports emerged that the government had achieved its objective of 15 million vaccinations during the past weekend, or two days ahead of schedule. 15.062 million people have already been vaccinated with a first dose and 537,715 people with a second dose. Authorities now aim to deliver vaccines to another 17.2 million people by the end of April.

The success in vaccine roll-out may allow the government to consider easing some lockdown restrictions from mid-March in an attempt to re-open the economy. British Prime Minister Boris Johnson is to deliver a speech on this matter on February 22nd.

“GBP continues to reap the dividends of a successful vaccine roll-out and momentum is building towards a re-opening of the economy – probably starting with schools on March 8th,” Chris Turner, Global Head of Markets at ING, said.

Meanwhile, against a basket of six major peers, the US Dollar was a notch weaker on Monday at 90.33, after slipping as low as 90.25 last week, or a level not seen since January 27th (90.15).

Having reached a two-month peak at 91.60 on February 5th, the US Dollar Index has since eased as the latest US employment data turned out to be weaker-than-anticipated.

“Now the market is looking for actual evidence that the U.S. economy is outperforming,” Shinichiro Kadota, senior currency strategist at Barclays Capital, was quoted as saying by Reuters. “The economic data needs to improve.”

As of 10:02 GMT on Monday GBP/USD was edging up 0.42% to trade at 1.3903, after earlier touching an intraday high at 1.3914, or its strongest level since April 27th 2018 (1.3935). The major pair has gained 1.59% so far in February, following another 0.24% advance in January.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 15.4 basis points (0.154%) as of 9:15 GMT on Monday, up from 15.0 basis points on February 12th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3828
R1 – 1.3880
R2 – 1.3914
R3 – 1.3966
R4 – 1.4018

S1 – 1.3793
S2 – 1.3741
S3 – 1.3707
S4 – 1.3672