- GBP/USD: Pound sterling rebounded on Monday after last week’s sell off
- The dollar traded broadly higher versus its major peers, albeit lower against the pound
The pound rebounded back over US$1.29 on Monday, briefly reaching a high of US$1.2947 before closing the session at US$1.2916 with gains of 0.2%. The pound is over 0.1% lower against the US dollar in early trade on Tuesday as investors look ahead to Jerome Powell’s appearance before Congress.
GBP/USD: Pound sterling rebounded on Monday after last week’s sell off
Pound sterling rebounded on Monday after last week’s sell off, as investors focused on Boris Johnson’s infrastructure spending plans over Brexit trade deal concerns. Boris Johnson approve the HS2 high speed rail link over the weekend and also shared his approval for a bridge between Northern Ireland and Scotland. High infrastructure spending can have an inflationary effect, explaining the lift in the pound.
Today UK data will be under the spotlight. Industrial production and manufacturing are expected to show that the pace of weakness eased in December. The preliminary fourth quarter GDP reading is expected to attract the most attention. Analysts are forecasting 0% growth, as stronger consumer spending is set to be offset by weak inventories and foreign trade.
The dollar traded broadly higher versus its major peers, albeit lower against the pound
Persistent fears over coronavirus and its impact on the global supply chain and global growth ensured flows into safe havens such as the US dollar remained strong. As some Chinese workers trickled back to work, many factories such as LG and Samsung still remained closed.
Today attention will switch firmly to Federal Reserve Chair Jerome Powell as he heads to Capitol Hill to give his semiannual testimony before Congress. Today he will testify to the House of Representatives and tomorrow to the Senate.
His appearance comes just as the US is recovering from a bruising trade dispute with China, as inflation remains low but the labour market robust. However, more importantly his testimony will come amid growing fears of coronavirus and how it will affect global growth.
Jerome Powell will look to give a view on the economy and some clues of the direction of monetary policy without tying the Fed to a particular policy path. Should his tone be too cautious then the dollar could drop as investors start pricing back in an interest rate cut.