GBP/USD rallies above $1.21 on broad US dollar weakness

The US dollar continue to push lower on Thursday as the currency fell victim to thin trading conditions and an upbeat market mood.

Meanwhile, the pound is struggling to find momentum this morning, with GBP/EUR subdued at €1.1615 and GBP/USD dipping to $1.2093. GBP/CAD is rangebound at CA$1.6143, while GBP/AUD and GBP/NZD hold steady at AU$1.7905 and NZ$1.9352, respectively.

Looking ahead, will a stronger-than-expected German GDP reading prop up demand for the euro today?

What’s been happening?

The recent USD selling bias remained firmly in place through yesterday’s trading session, with the US dollar vulnerable to thin trading conditions as local markets closed for the Thanksgiving holiday.

This was further compounded by a bullish market mood, after the FOMC minutes on Wednesday highlighted that a ‘substantial majority’ of Federal Reserve policymakers wish to slow the pace of future interest rate hikes.

The pound, meanwhile, continued to push higher on Thursday. Sterling being supported by some hawkish comments from several Bank of England (BoE) policymakers.

The policymakers were unanimous in suggesting interest rates needed to continue to rise. Bolstering expectations for December’s rate decision and lifting GBP exchange rates.

At the same time, the euro was buoyed by a stronger-than-expected recovery in German business morale. Although these gains were capped by some dovish minutes from the European Central Bank’s latest policy meeting.

What’s coming up?

Kicking off today’s session was the publication of Germany’s latest GDP figures.

The finalised figures reported growth in the Eurozone’s largest economy at faster pace than previous expected in the third quarter, likely helping to underpin the euro today.

Also set to influence the euro later today will be a speech by ECB Vice President Luis de Guindos. Could an optimistic outlook from Guindos help to bolster the euro?

Meanwhile, a sparse data calendar could leave the pound without its own directional bias today, leaving it at the whims of markets.

Finally, while US markets are open again today, trading conditions are likely to remain thin. Coupled with a lack of notable USD data releases, this could leave the US dollar to close the week on the defensive.