GBP/USD holds steady above 1.3700 as market fear eases

The British pound (GBP/USD) rose for the second consecutive day on Thursday. It rose to its highest level since Monday as the UK continued reopening and as fears of the Delta variant waned. The pair is trading at 1.3760, which is 1.70% higher than the lowest level this week. 

Market fear eases

The British pound and other developed world currencies declined sharply against the US dollar on Monday as investors remained concerned about the Delta variant. This decline coincided with the overall sell-off in global stocks as most indices recorded their worst day this year. 

The CBOE VIX index also rose to the highest level in weeks while the closely-watched fear and greed index fell to the lowest level this year.

The sterling has rebounded in the past two days as fears of the variant eased and as the UK continued to reopen. On Monday, the country’s government removed all restrictions on residents and businesses. This means that all businesses, including bars and restaurants, are now allowed to operate at full capacity.

While the easing of lockdowns was welcome, many analysts warned that it will have negative impacts as the number of cases rise. Indeed, recent data shows that the UK is recording more than 60,000 new cases every day. And a leading scientist warned that the number could jump to 200,000. 

The sterling rebound also happened at a time when the fear and greed index has risen to 25 and global stocks have recouped their Monday losses.

The GBP/USD also shrugged the ongoing Brexit spat between the EU and the UK. The UK government called for a complete overhaul of the Northern Ireland Protocol, a key part of the deal signed in December last year. In a statement, Brexit minister, Lord Frost asked the EU to renegotiate the parts of Northern Ireland. The government wants to eliminate checks on goods moving from Northern Ireland and Great Britain.

GBP/USD forecast

The GBP/USD has rebounded from its lowest level on Monday. Forex platforms offering GBP-USD trading quoted the price at 1.3760 on Thursday. Along the way, it has moved above the 23.6% Fibonacci retracement level on the 4H chart. It has also moved above the 25-day and 50-day moving averages. 

Further, it has moved above the important resistance level at 1.3747, which was the lowest level on July 2 and 8. Therefore, the pair will likely maintain the bullish momentum as investors target the 38.2% retracement level at 1.3835.