GBP/USD reaches highest level in 2020 powered by Powell

GBP/USD has hit the highest levels since December amid dollar weakness. Concerns about Brexit and rising UK coronavirus cases and BoE Governor Bailey's speech are eyed on Friday, Yohay Elam, an analyst at FXStreet, reports.

Key quotes

“Federal Reserve Chairman Jerome Powell announced a major policy shift – allowing inflation to overheat to allow employment to rise – thus signaling lower rates for longer. Investors had anticipated the move and the initial reaction was choppy – but after the dust settled, the prospects of long-term low borrowing costs are weighing on the dollar.” 

“Britain is probably edging closer to a no-trade-deal Brexit. According to The Times, EU officials have laid down an ultimatum of two weeks in order to clinch a breakthrough in trade and security talks. David Frost, the UK's chief negotiator, reportedly rejected Brussels' approach and said he would not accept ‘dictates’.”

“Andrew Bailey, Governor of the Bank of England, will address the virtual Jackson Hole Symposium – the same venue where Powell spoke. Bailey may respond to his American colleague by expressing openness to a similar policy.”

“Another reason for concern is the increase in coronavirus cases in the UK, just as the school year begins. Authorities are scrambling to reopen schools safely, and the task has become harder amid an increase in infections. That compares with a gradual decrease in America's COVID-19 curve.”