GBP/USD: Fears of COVID-19 variants and robust US data to push cable lower

At the moment, markets are calm amid the long weekend in both the US and the UK, and after Friday's choppy trading, triggered by end-of-month adjustment. But fears of COVID-19 variants may end holiday calm and send sterling down, FXStreet’s Analyst Yohay Elam briefs.

GBP/USD is already edging lower on Monday. How far can it go?

“People residing in the UK may enjoy the long weekend at home and in several European countries – but not in France nor Germany, where they are required to quarantine. These restrictions serve as a reminder of the B.1.167.2 variant. Sterling is on the back foot due to these fears.”

“Americans are also benefiting from a long weekend, and they have reasons to be cheerful about the economy. Core Personal Consumption Expenditure (Core PCE) – the Federal Reserve's preferred measure of inflation – hit 3.1% in April. Apart from exceeding estimates, it is also significantly above the bank's 2% target and may cause officials to rethink their accommodative policies. The specter of a rate hike is supporting the dollar.” 

“Some support awaits at 1.4140, which was a swing low last week. It is followed by 1.4090, and then by 1.4010, the former double-top.”

“Some resistance is at 1.4210, a peak from last week, and then by 1.4220 and by the 2021 peak of 1.4240.”