The USD has been pressured as the Fed have stuck to their bearish mantra that they will not respond to rising inflation in a knee jerk reaction. Instead, they are happy to see a period of transitory high inflation. This allowed USD bears to keep selling.

The GBP in contrast has a strong bias to the upside. Unemployment levels were lower than expected this week at 4.8% vs 4.9% expected and the UK has a fast vaccine rollout policy. The SONIA futures currently imply that the UK will see a rate hike as early as September 2022 and a rate of 0.35% by March 2023. This is a much faster than expected return to normalisation than the Fed.

This will result in an upside bias for the GBPUSD as long as the Fed keep to their bearish outlook.

Key Trade Risks: If the Federal Reserve announce bond tapering then GBPUSD prices should fall lower.