The British pound is significantly strengthening against the background of the recent bearish candle. This fact encourages speculators on the dollar and bulls on the pound. According to Wells Fargo analysts, the May US employment report confirmed that the greatest difficulty for the labour market recovery is the labour force itself.
Analysis of the pound to dollar exchange rate at the beginning of summer
The British pound is trading against the dollar around 1.4165.
On the last day of the working week, the pound reversed its losses against the US currency, as weaker-than-expected US employment data pushed the dollar back from recent highs. A recent series of strong economic data from the US has boosted the US currency index to its highest level since mid-May. The gains came as investors expected the Fed to respond to the growth of the economy and move to tighten monetary policy earlier than expected.
But the employment data released on Friday turned the situation around in the foreign exchange market and allowed sterling to maintain its position. The pound (the second-best performing G10 currency against the dollar since the start of the year) has been hurt by the dollar’s strength in recent days and fears of the spread of a new strain of coronavirus in the UK.
The positioning of traders is still focused on a net long position on the pound, which means that the market is betting on the future profit of the currency against the dollar. The economy is currently maintaining good momentum, enough to support the Bank of England’s reasonably optimistic forecasts and expectations that the regulator may tighten measures before the Fed does the same in the second quarter of 2022. Thus, the British pound has every chance to return to a five-year high against the dollar over the next year