The GBP currency pair rally on Tuesday morning ended with some sideways movement in the evening, as the bulls attempted to push higher but seemed to have exhausted their momentum.
The GBP/USD peaked after breaking the 1.2632 resistance level before a slight pullback and performance that highlighted the reinforced resistance at that level. The price of the currency pair remained suspended between 1.2632 and 1.2612 for some time before some bearish momentum pushed it down towards the 1.2572 support level.
The sideways performance was short-lived as Wednesday kicked in, and the bears took over, pushing the price down and obliterating the previous day’s gains. The bearish momentum resulted in lows of around 1.2486 before noon on Wednesday.
The currency pair’s performance is interesting considering that it had a strong rally on Tuesday as the GBP weighed over the dollar. This was after the release of the latest global economic outlook analysis by the International Monetary Fund (IMF). The GBP/USD rally may have been influenced by the focus on the U.S dollar which took a bit of a hit, thus paving the way for the GBP to gain. The sideways performance towards the end of Tuesday was just the calm in the storm before the market started correcting itself.
The U.S dollar’s rally on Wednesday morning accounts for the bullish performance on the GBP/USD currency pair as the greenback gains against the Pound Sterling. The dollar may attribute part of its recovery to the fact that U.S President, Donald Trump hinted that he might reopen the U.S economy. The coronavirus pandemic has led to an economic shutdown as quarantine and lockdown measures were implemented to try and prevent the spread of the coronavirus. The USD’s rally may have also been aided by news of slowing infection and mortality rates in the U.S.
Although the dollar might be rallying in the hopes of an economic reboot, it is worth noting that the coronavirus threat remains active since there is still no cure. So far the fallout from the pandemic has caused a devastating effect on the global economy. Analysts believe that the situation will lead to one of the worst economic recessions that have taken place in decades.