GBP/USD: Darkening clouds opens room to the downside

Leicester's loosening is the only positive for the GBP/USD pair while the UK's relations with Russia and China and US developments among other things are set to weigh on the cable, Yohay Elam, analyst at FXStreet, informs.

Key quotes

“Lifting Leicester's lockdown – that may be the only piece of positive news supporting the pound. England's midsized Midlands city was excluded from the UK's gradual reopening amid a resurgence of coronavirus cases, but the situation has improved – and easing is on the cards.”

“The safe-haven US dollar is on the rise amid concerns about rising coronavirus cases in the US. Daily infections hit yet another new daily high of 75,000 and mortalities are rising as well. Texas denied it will impose a full shutdown, following California's steps.” 

“An updated view is due out from the University of Michigan's preliminary Consumer Sentiment gauge for July. It is set to show a minor advance to 79 points, stalling its bounce from the lows and well below the pre-pandemic highs of around 100 points.” 

“Back in the UK, authorities revealed that Russia has been trying to steal coronavirus vaccine research and that Putin's country also attempted to intervene in Britain's 2019 elections, which is dominating the press. The news comes on top of PM Boris Johnson's decision to phase out the usage of Huawei's 5G equipment. The Chinese telecoms giant is suspected of close ties to the military.”

“Worsening relations with large countries as the UK leaves the EU may weigh on the economy and sterling. EU leaders are busy negotiating the recovery fund and do not have Brexit on their minds.” 

“Sterling is also softer amid comments from Andrew Bailey, Governor of the BoE, who told MPs earlier in the week that interest rates will remain low for at least two years. Bailey speaks later in the day and may comments on negative borrowing costs – a topic that previously pounded the pound.”