Disappointing US employment statistics and the loss of an absolute majority of seats in local parliament by the Scottish National Party pushed GBP/USD quotes to their highest levels since late February. The bulls are serious about restoring the upward trend, and it must be admitted that they have quite good opportunities for this.
In April, the US unemployment rate rose from 6% to 6.1%, and employment - by 266,000. If this happened before the recession, the figure would look impressive, but the labor market needs to recover its lost ground, and Bloomberg experts expected to see about 1 million new jobs. Unfortunately, it seems that the United States is not out of the woods yet, which made investors finally believe in the Fed's long-term ultra-soft monetary policy, lowered Treasury yields, and weakened the US dollar against major world currencies. The pound is no exception, especially since the results of the elections to the Scottish parliament reduced the risks of an independence referendum.
Nationalists won only 64 of 129 seats, and although they remain the main party in the region, the plebiscite vote is likely to have to be postponed indefinitely. According to British Prime Minister Boris Johnson, the independence referendum in the current environment is a reckless and irresponsible decision. Earlier, London emphasized that such an opportunity for Edinburgh may arise once a generation. Let me remind you that the last vote took place in 2014.
Scottish Parliamentary Election Results
Despite the loss of one seat, the nationalists do not intend to abandon their plans. Thanks to the support of the Green Party, they continue to nurture the idea of a plebiscite, and Scottish Prime Minister Nicola Sturgeon said that the Johnson government has no democratic excuses to block the people's right to choose their own future. Thus, Edinburgh nods to democratic principles, London to the law, and the case is likely to be decided in court. But this will clearly not happen in 2021, so sterling ignores politics. The GBP/USD bulls took over the economy and, it seems, were not mistaken.
At its last meeting, the Bank of England raised its GDP growth forecasts for 2021 from 5% to 7.25%. BoE believes that the UK economy will be able to recover from the recession at the end of 2021, and not in the second half of 2022, as previously assumed. Inflation will return to the 2% target after a short-term surplus this year, and UK households will spend at least 10% of the £200 billion accumulated during the pandemic. The weekly QE scale was reduced from £4.4 to £3.4 billion. After such rhetoric, the pound could have risen immediately, but decided to wait for US employment statistics and was rewarded with the best daily rally against the US dollar in 5 months.
Technically, the Broadening Wedge pattern worked out, allowing us to form longs for GBP/USD from the levels of 1.3875 and 1.3925. They should be kept and increased on pullbacks, especially since the pair is at arm's length closer to the targets of the Wolf Wave and AB=CD models.
GBP/USD, Daily chart
