The cable breaks the 13-day-old trading range as broad US dollar weakness supersede uncertainty over Brexit and the coronavirus (COVID-19) vaccine news from the UK.  US dollar index (DXY) fell for the third day as the market’s risk-on mood joins reflation fears and directs the traders to the bonds from the greenback. To check the risk catalysts, the US Democratic Party’s readiness to go ahead with the $1.9 trillion covid stimulus without waiting for the Republicans’ assent to the details favor mainly favors the mood. Also backing expectations was the latest tweet from US President Joe Biden saying, “I know a lot of folks out there are losing hope, so I want to make one thing clear: I’m going to act as fast as I can to get Americans the relief they so desperately need.”

Further, the World Health Organization (WHO) stressed upon the use of the AstraZeneca vaccine instead of the claims over its efficacy on the South African variant of the coronavirus (COVID-19). Vaccine Optimism is boosted by the BBC’s news suggesting UK scientists are developing booster jobs to tackle Covid-19 variants, per the British Health Minister. The Guardian came out with the news, quoting British scientists, which says, “Leading vaccine scientists are calling for a rethink of the goals of vaccination programs, saying that herd immunity through vaccination is unlikely to be possible because of the emergence of variants like that in South Africa.”

The UK-EU tussle over the Northern Ireland border said, “Britain called on Monday for a reset in relations with the European Union and a refinement of a Brexit deal covering trade with Northern Ireland (NI), saying trust was eroded when Brussels attempted to restrict COVID-19 vaccine supplies.” Although Britain asked for a two-year extension to the NI border issue, The Telegraph says Brussels is poised to reject UK’s calls for an extension to Northern Ireland grace periods. The economic forecast from the UK’s National Institute of Economic and Social Research (NIESR) has cut growth forecast for 2021 to 3.4% from a previous estimate of 5.9%.

On the other hand, In the view of the economists at Goldman Sachs, the US economic recovery is likely to strengthen in the second quarter of 2021. Q2 GDP has improved at an 11% pace with a 10% forecast previously.

Expectations have been building that inflation would pick up as governments and central banks continue massive spending and easy money policies until officials are certain that their economies will recover from the coronavirus pandemic.

GBP/USD 4 Hour Chart:

Support: 1.3693 (S1), 1.3652 (S2), 1.3623 (S3).

Resistance: 1.3762 (R1), 1.3790 (R2), 1.3831 (R3).

Amidst all the catalysts directing towards broad US dollar weakness, we expect a bullish trend for GBP/USD.