GBP/USD: Britain’s reopening to lift sterling towards the 1.40 mark

GBP/USD has been hovering around 1.39 in some post-Easter calm. The British government’s announcement that it will proceed with the reopening plan on April 12 leaves the cable eyeing the 1.40 mark as the dollar is unable to fight back, Yohay Elam, an Analyst at FXStreet, reports.

The picture for the US economy is bright, but mixed for the dollar, while sterling is set to shine
“Prime Minister Boris Johnson has announced that the next phase of the reopening ‘is a go’ and apart from watering holes, gyms, hairdressers and other types of businesses will also return to normal. The move has come after as Britain’s vaccination campaign is bearing fruit – COVID-19 cases continue falling, contrary to what is happening next door on the continent.”
“With France, Germany, and Italy under lockdowns and struggling with another wave of the disease, the British government is also hesitant on resuming international travel. That means that Brits will continue spending money at home rather than abroad, adding another boost to the economy and the pound.”

“Perhaps the most significant factor moving forward is President Joe Biden’s infrastructure plan. Democrats will have to go it alone, and once again, Senator Joe Manchin has the last word. The conservative member from West Virginia rejects a 28% corporate tax rate but is ready to settle for 25%. While higher chances of new expenditure may boost inflation, Federal Reserve rate hikes, and a stronger dollar, investors’ relief with lower taxes means a weaker greenback.”

“Support awaits 1.3840, the daily low. It is followed by 1.3810, which was a cushion last week. Resistance is only at 1.3920, the daily high, followed by 1.3960 and finally by 1.40 – a psychologically significant barrier.”