GBP/USD bounces-back above 1.40 amid the UK re-opening optimism

• GBP/USD attempts a bounce above 1.40, multi-year tops back in sight.
• UK PM Office says the first step of easing the lockdown to begin from March 8.
• Reflation trade also boosts the risk asset, the pound.  

GBP/USD is back on the bids in the European session, once again approaching the 1.4050 level to retest the 35-month highs.

The cable picked up fresh bids, bouncing off a brief dip to 1.3981, after the UK Prime Minister (PM) Boris Johnson’s office announced that the four conditions to ease the covid-induced lockdown are met and therefore, the government can proceed with the first step of reopening the economy from March 8.

Meanwhile, PM Johnson said that “we will be setting out a roadmap to bring us out of lockdown cautiously,” with the main priority of re-opening the schools.

The UK has gained the first-mover advantage, in terms of getting the covid inoculations and now with about 25% of the population vaccinated with the first dose. This factor continues to underpin the sentiment around the pound.

The reflation trade amid vaccine and stimulus optimism continues to benefit the risk asset, the GBP, as investors ignore that latest Telegraph report highlighting impending Brexit risks.

Markets remain focused on the reflation trade theme, awaiting fresh updates on a potential US stimulus deal. The main highlight for the spot remains the UK PM Johnson’s speech, in which he is expected to outline the path out of the lockdown.

GBP/USD technical levels

“The upper line of an ascending trend channel from September 10, 2020, currently around 1.4035, guards short-term GBP/USD upside. While the pullback moves eye the 1.4000 threshold, the mid-February top near 1.3950 will question the cable’s any further weakness,” FXStreet’s Analyst Anil Panchal noted.

GBP/USD additional levels