GBP/USD: Relentless dollar weakness may result in further gains for cable

GBP/USD has managed to take advantage of dollar weakness to peek above 1.40 with Britain's successful vaccination campaign also helping. Reactions to the UK's jobs report and US infrastructure developments are eyed, Yohay Elam, an Analyst at FXStreet, briefs.

Sterling has reasons to rise while the picture for the dollar is more complex

“The market mood remains upbeat about the American economy, which is roaring back and helping lift other economies. This ‘risk-on’ mood weighs on the safe-haven dollar, and this greenback weakness now has a life of its own – it continued despite a decline in US stocks on Monday.”

“President Joe Biden met a bipartisan group of members of Congress and talks remain at an initial phase. The White House wants to fund its $2.25 trillion plan via tax hikes, which imply lower debt issuance. Additional headlines from Washington are set to move markets.” 

“The UK continues benefiting from Britain's vaccination campaign. After running quickly with first doses, the UK fully immunized ten million people – a remarkable catch-up with second jabs. Infections and hospitalizations continue falling, despite the country's gradual reopening.” 

“The pound has received a boost from UK labor figures. The Unemployment Rate surprised with a drop to 4.9% in February, and the Claimant Count Change surprised with only a minor increase of 10,100 in March. Britain's labor jobs market seems to have weathered the lockdown months and is ready to spring higher.”

“Pound/dollar is in overbought territory – the Relative Strength Index (RSI) is significantly above 70, implying an imminent downside correction. All in all, the graph is pointing to a setback followed by gradual gains.” 

“The daily high of 1.4008 nearly converges with the March peak of 1.4015, and this area is critical for the next upside moves. Some support awaits at 1.3960, which was a swing high in mid-March. It is followed by the early-April peak of 1.3920.”