The British pound strengthened its position yesterday on the background of the growth of the UK economy, as well as after the news on the elections, which increased the likelihood of a Brexit deal later this year.

Even though uncertainty about Brexit and slowing global economic activity have a restraining effect on the growth of the British economy, the risk of lower interest rates by the Bank of England has significantly decreased after today's data that the UK economy resumed growth in the 3rd quarter of this year. Let me remind you that in the 2nd quarter, the economy contracted, which brought the country one step closer to a possible recession.

According to the National Bureau of Statistics, in the 3rd quarter of 2019, UK GDP grew by 0.3% compared to the 2nd quarter, and on an annualized basis, growth reached a level of 1.2%. It is important to note that the growth was facilitated not only by consumer spending but also by high foreign trade, which made it possible to offset the reduction in capital investments and inventories of companies.

Compared to the 3rd quarter of 2018, GDP grew by 1%.

The deficit of foreign trade in goods of the UK in September rose to 12.5 billion pounds, compared with the revised value of 10.8 billion pounds in August. Economists had forecast a foreign trade deficit of 10.5 billion pounds. It is important to note that the larger increase in the deficit occurred with countries outside the EU, where in September this year, the deficit was 4 billion pounds.

Traders ignored the report on industrial production in the UK, which in September this year decreased by 0.3% and 1.4% compared to the same period in 2018. Although economists had forecast growth of 0.1% and contraction of only 1.1% respectively, it is clear that the overall weakness of the global economy and the problems with Brexit are putting some pressure on the industry sector.

As noted above, after the data on economic growth, the reasons for lowering the key interest rate of the Bank of England was less. As recently as last week, traders were selling the pound amid fears that the British regulator could go for a further cut in interest rates due to uncertainty with Brexit and weak economic growth. The downward risk to the economy as a result of the hard Brexit has decreased, and the new fiscal stimulus measures promised by the government next year, and yesterday's economic data, reduced the likelihood of lowering rates.

Traders ignored the news that the rating agency Moody's downgraded the outlook for the UK's credit rating to negative from stable. The report indicated that the downgrade is since lawmakers cannot break the deadlock in negotiations on the planned exit from the EU.

However, major support for the British pound was provided by the news that the leader of the Brexit Party, Nigel Farage, refused to fight for the seats in the British Parliament claimed by the Conservative Party. Let me remind you that the general election will be held on December 12.

Farage's refusal will allow the Conservative Party to gain a majority with greater confidence. The leader of the Brexit party said that his candidates will only fight for places for which the Labor Party and the party of opponents of Brexit will fight. In his opinion, this will avoid another deadlock in the work of parliament and will benefit from the agreement on Brexit.

As for the current technical picture of the GBPUSD pair, there is progress in the growth of the pound, but more weight will be given to opinion polls, which can quickly "land" the pound. It is best to consider new long positions in the trading instrument after a downward correction in the area of large support levels of 1.2830 and 1.2795, from where a new lower border of the upward channel will be formed. The breakthrough of the resistance of 1.2880 will provide buyers of the pound with a more powerful growth in the area of 1.2910 and 1.2950.

AUDUSD

The Australian dollar fell today against the US dollar after it became known that the consumer confidence index in Australia fell. According to ANZ and Roy Morgan, the index fell by 2.1% to 111.1 points. The agency noted that the sharp decline in confidence is due to the fall in retail sales, which was observed from July to September this year. The Australian business confidence index rose to 2 points in October and the Australian business conditions index rose to 3 points.