GBPUSD rose after the USD price stabilizing

Mohammed Abdelkhalik
January 12, 2021

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GBPUSD rose in trading on Tuesday, as the dollar stabilized after its recent rally, which allowed the British currency to recover after four consecutive sessions of losses.

The dollar’s ​​recent gains on the back of rising US Treasury yields pushed the pound to its lowest level since December 29 at $ 1.3451 last week, as markets bet on the massive fiscal stimulus in the US.

During Tuesday’s trading, the pound sterling was able to compensate for some of those losses with the rise in riskier currencies along with the recovery of stock markets, as GBPUSD traded at 1.3549


Recession fears with the third close

As the impact of Brexit faded from the European Union and its repercussions on the British pound, investors began to focus more attention on the British economy, which seems likely to slide back into recession, amid the prospects of a contraction of the British economy in the fourth quarter of 2020 and the first quarter of the year. 2021, after a record drop that exceeded 20% in production rates in the first two months of last year’s shutdown.

Yesterday, Monday, British Finance Minister “Rishi Sunak” said that the British economy is expected to drift into recession before starting to improve, and he attributed this to the general closings for the third time that Britain is currently subject to limit the spread of the second fast-spreading wave of Coronavirus.

The third closing measures have increased the chances that the Bank of England will cut interest rates below zero as early as next May.

GBPUSD rose after the USD decline

The US dollar held on to its recent gains on Tuesday after rising US Treasury yields increased demand for the greenback.

The dollar index settled at 90.489 points, unchanged during the day, and it rebounded from its lowest levels at 89.206 points recorded last week.

The US dollar is the biggest loser in the past 10 months, due to the broad stimulus monetary policy from the Federal Reserve that forced investors to abandon the currency in exchange for alternative currencies, and reached its lowest level in more than two and a half years against the euro earlier this month.

But expectations of a massive spending spree under the incoming Joe Biden administration pushed Treasury yields higher, as ten-year yields hit their highest level in 10 months today.


Author Mohammed Abdelkhalik

Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.