GBP/USD: Pound Short Covering before Tuesday Data Dump

• Dollar slowed down by Chinese Renminbi strength
• Pound sterling higher on Monday despite Ireland concerns

The British pound is up against the US dollar on Monday afternoon in a modest recovery from the two-month lows reached last week when US jobs growth exceeded expectations and Brexit concerns weighed on the currency of the United Kingdom.

GBP/USD was higher by 39 pips (+0.29%) at 1.2930 with a daily price range of 1.287 to 1.295 as of 2pm GMT. The currency pair dipped below 1.29 early Monday but later recovered it when there was no follow-through selling. The gains make a small dent in the -2.33% decline the exchange rate experienced last week.

Dollar slowed down by Chinese Renminbi strength

The biggest drag on the dollar appeared to be some strength in the Chinese Renminbi, which now ranks as the eighth most actively traded currency in the world. There was some optimism that the Chinese authorities can limit the damage to the economy with easy money policies, which are already showing up in inflation data. The People’s Bank of China (PBOC) began a new lending program for banks in areas affected by the coronavirus, mostly in the Hubei province, home to Wuhan where the coronavirus originated. Actions already taken by the PBOC have contributed to Chinese inflation at a higher than expected 5.4% year-over-year.

Although workers at the Foxconn factory in Zhengzhou returning to work was well-received from an economic point of view, the rising death toll has people feeling anxious. The deaths from the Coronavirus have now reached 811, according to China which surpasses the total from SARS.

Pound sterling higher on Monday despite Ireland concerns

Pound sterling was higher on Monday, mostly as a result of short-covering and some short-term dollar weakness. A shock election victory for Sinn Féin in Ireland, a political party known as the political arm of the IRA during the Troubles in Northern Ireland is on the face of it, not good news for the United Kingdom.

There is a data dump from the United Kingdom tomorrow that could see some renewed volatility in the exchange rate. Data on industrial production, trade balance and Q4 GDP growth. The global slowdown that hit economies across Europe in the fourth quarter means economists expect UK GDP  to have flat-lined at 0% q/q.

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