GBP/USD Underpinned By Optimism Over Trade Talks, Rebound in Equities

Risk appetite returned to the market early on Tuesday as the US Federal Reserve prepared to begin purchasing up to $250 billion in individual corporate bonds. In addition, a report from Bloomberg stating that the Trump administration is preparing a nearly $1 trillion infrastructure proposal helped to lift investors spirits.

UK Prime Minister Boris Johnson spoke with European officials on Monday and both sides agreed that new momentum was required in negotiations. Afterwards Boris Johnson stated: “I don’t think we’re actually that far apart, but what we need now is to see a bit of oomph in the negotiations.” He added; “The faster we can do this, the better, and we see no reason why you shouldn’t get this done in July.”

Data from the Office for National Statistics (ONS) showed that the UK unemployment rate remained unchanged at 3.9% between February and April, beating analyst expectations. However, overall the employment report was not a positive one. Between March and May the UK recorded a record quarterly drop in job vacancies and the number of workers on UK payrolls fell by more than 600,000. Jonathan Athow, deputy national statistician for economic statistics at the ONS stated: “The slowdown in the economy is now visibly hitting the labour market, especially in terms of hours worked.”

Concerns remain about a second wave of COVID-19, with the US and China facing new coronavirus outbreaks. Data from Johns Hopkins University indicates that coronavirus COVID-19 global cases have risen to 8,051,732 with 437,266 fatalities. Tedros Adhanom Ghebreyesus, the head of the World Health Organization (WHO) said on Monday that over 100,000 confirmed cases of coronavirus have been reported worldwide each day over the past two weeks and warned that “countries must stay alert to the possibility of resurgence.”

Investors turn their attention to the US Retail Sales release and the testimony of Fed Chairman Jerome Powell before the Senate Banking Committee later on Tuesday. Looking at the GBP/USD daily chart we can see that price found resistance at the 200-period simple moving average and that trendline support lies below.