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GBP and AUD rise against USD over improving confidence on local economy; Bitcoin eyes at $50,000 with aggressive gains

  • GBPUSD rises over bets for faster recovery
  • Bitcoin eyes at $50,000 while USD drops as Treasury yields soften
  • AUD surges given improved business confidence

GBP surged to a 22-month high against USD, supported by rising bond yields over bets on faster economic reopening. Vaccine rollout has been ongoing with high speed in the UK, giving the Bank of England confidence to leave its rates unchanged. The current projection is to recover to pre-COVID level by the end of 2021, and the central bank has also forecasted the growth rate to be at 7.25% for 2022. One risk, however, is that the virus mutation could derail current rollout. AstraZeneca is the main vaccine being distributed now in the UK and it offers as little as 10% protection against the new variant, according to a small study conducted by the University of Texas.

USD continued the downward momentum since the opening of this week. Starting from Tuesday, USD’s selling pressure has been broad-based, particularly in pairs such as GBPUSD and USDJPY. This is mainly due to the softening Treasury yields on longer-term bills and the concerns over potential inflation brought by the stimulus package. Some analysts believe that reflation may be back in full force, usually characterized as bumps in the prices of consumer goods and rise in wages. On the other hand, Bitcoin soared to a new record high on its way towards another key milestone at $50,000. Since March 2020, around the onset of the COVID, it has surged more than 1,000%, and Tesla’s recent statement over the Bitcoin investment has helped it surge nearly 20% overnight.

AUD continues to gain against USD given strong business confidence. The NAB Business Confidence index rose sharply to +10 in January, up from +4, exceeding the long-term average. NAB notes that, despite weakening business conditions, employment remained in the positive territory, indicating that businesses are keeping expanding through hiring. Moreover, the report has also confirmed the positive trend for retail trade and capex. The next release to be watched this week is Australia Westpac Consumer Sentiment. It started at -4.5% in 2021, but if it rebounds, AUD may continue its rally.