Daily Market Recap - GBPUSD The Pound's rise will be faced with two events this week

Supported by growing evidence that the easing of pandemic restrictions is underpinning UK growth, the GBP/USD pair has resumed its upward trend.

Following the UK's reopening of non-essential stores and outdoor venues on April 12, early data shows that retail footfall increased by 31% in the first week of reopening and is now at 75% of the same week in 2019. The latest data also highlighted the magnitude of the task: backlogged jobs decreased by 2% after reopening but remain high at 17% of the workforce.

The next phase of reopening is scheduled for May 17, and the government expects pandemic-related restrictions to be fully lifted by June 21. The planned reopening depends on the trajectory of the virus, and in that regard, the data is very encouraging. The seven-day average of new COVID infections and deaths has dropped.

Two factors will influence the price of the pound in the short term, the Scottish election, and the central bank meeting. If the Scottish Nationalist Party wins an overall majority in the May 6 Scottish elections, pressure for a referendum on independence will intensify, which could cause the pound to underperform against major currencies.

The challenge for the Monetary Policy Committee is to keep expectations stable so as not to tighten monetary conditions through a re-pricing of the short rate which could stifle the recovery.

It is unlikely that the Bank of England will reduce the pace of purchases before this summer. That said, any policy update on its balance sheet that suggests an anticipated reduction poses some risk to long-term British yields.

From a technical perspective, the pound has retraced 38.2% of its last wave of gains against the dollar. A classic ratio that validates a simple correction of the uptrend. Prices are moving above an ascending oblique which confirms the positive bias on the pound.

(Chart Source: Tradingview 03.05.2021)

To confirm that the cable's ascent is resuming, it now needs to break above a line of resistance touched several times on the psychological level of 1.4000. The road would then be open to the high of the year at 1.4242 and then to that of 2018 at 1.4375. In case of failure, the risk would be to see a return to 1.3670 and then a 50% retracement, a strong support area below 1.3500.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.