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05.08.2020 04:34 PM
Pound sterling continues to strive for growth

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The pound sterling is rapidly moving to its new high level, which corresponds to the maximum value over the past five months. The greenback, on the other hand, weakens against the pound on the news that the US government is still unable to come to a consensus on the next package of stimulus measures designed to support the country's citizens and, consequently, the economy. It seems that the negotiation process on this issue has reached an impasse, and on Friday the government is already on vacation, which prompts a decision to be made on a tight schedule.

On Wednesday morning, the pound has increased its value against the weakening US dollar. In addition to the open problem with stimulation, the greenback is also under pressure from a sharp decline in the yield of most American bonds. In fact, this puts the dollar at another dead end, from which it is not yet possible to get out of.

In the meantime, the pound is once again testing the pre-crisis levels and the maximum heights. Thus last week the sterling, in relation to the dollar, tried to consolidate at the maximum of the last five months.

The value of the pound jumped another 0.3% and reached $ 1.3106 per sterling. Meanwhile, it slightly decreased by 0.16% in relation to the euro, which brings it to the current level within 90.43 pence per euro.

For several months now, the pound sterling has been demonstrating steady and purposeful growth against the dollar. Note that last month saw the most rapid monthly growth of the pound sterling, which has only been recorded in the last ten years. However, analysts argue that the sterling has little merit here: most likely, such a success is associated more with the difficult position of the dollar and its weakness in the market. As soon as all the problems of the greenback are resolved, the increase in the pound will also gradually come to naught, if there are no other stable factors for growth. Recall that the greenback began to weaken a month ago, and the US government is currently having difficulty in finalizing the stimulus measures. When Democrats and Republicans finally agree, the problem will disappear, and with it the pressure on the dollar, which will move to growth.

But at present, the pound owns the growth, however, this positive movement is a little restrained by the upcoming meeting of the country's main regulator - the Bank of England, at which the question of further monetary policy will be raised.

Moreover, according to incoming data, the second wave of coronavirus pandemic could have a much more serious negative impact on the economy. And the intentions of the country's Prime Minister Boris Johnson to suspend the lifting of quarantine measures for at least another two weeks (as the number of COVID-19 infections continues to increase) completely slowed down the process of strengthening the sterling and its upward movement.

Also, the trade agreement with the EU after Brexit is due in December which is another impending problem. Some experts believe that this will be the biggest problem for the pound in the future.

Maria Shablon,
Analytical expert of InstaForex
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