An important task now facing the British currency is to strengthen its position, in particular against the dollar. Experts fear that the pound will not have enough strength to resist the dollar for a long distance, although they do not exclude the temporary rise of the British currency.
According to analysts, the pound is trying to resist depression at the moment, which drove it into a difficult situation due to the intensification of coronavirus pandemic (COVID-19) and an increase in the number of cases and fatalities in Britain. Experts say that in the GBP/USD pair, the circumstances play against the pound and on the dollar side. The US currency still holds the status of a safe haven asset, which attracts investors, while on the contrary, the British currency is very difficult to resist its rival. On the morning of Tuesday, April 28, the GBP/USD pair was at around 1.2421, and then plummeted to 1.2414 - 1.2415, but managed to rise.
In this regard, currency strategists at Bank of America fear a strengthening of the pound's depressive mood. Analysts note high risks of the pound collapsing in relation to multi-year lows against the US dollar. They also pay attention to the obvious "bearish" trends of the GBP/USD pair, recommending to sell the pound on growth. According to experts, the "bulls" of the pound are not too profitable to buy currency, especially after a long correctional strengthening of GBP. At the same time, the "bears" are in no hurry with sales, and as a result, a vicious circle is obtained. The Bank of America expects another surge in demand for the dollar, against which the pair GBP/USD is expected to decline to 1.1000.
The current macro statistics, which demonstrate the difficult economic situation in the country, has also set up the British currency. At the end of last week, the pound still strengthened despite gloomy reports. It increased by 0.3%, to 1.2358 against the dollar, struggling to hold on to its gained positions. However, it was not easy: the negative data dragged to the bottom. It can be recalled that extremely disappointing economic data were published in the UK last week. For example, the IHS Markit / CIPS Flash UK index for purchasing managers (PMI) fell to another record low of 12.9 points. Moreover, it can also be noted that it reached a solid 36 points in March of this year. The current collapse shattered the forecasts of experts, who expected the indicator at the level of 31.4.
Another supplier of negative information for both the British currency and the national economy was retail sales data for March 2020, published last Friday. According to the report, these indicators lost from 4.1% to 5.8% y / y. The possible drop in retail trade, the indicators of which will be provided by the Confederation of British Industrialists (CBI), does not add optimism. According to preliminary forecasts, it can fall to -40%. Analysts conclude that the current situation does not contribute to the growth of the pound.
An additional impulse for the weakening of the GBP is the growing threat of "hard" Brexit. It can be recalled that London recently refused to extend the so-called "transition period" which is necessary for the smooth adaptation of the British economy in the new conditions. According to preliminary data, the final gap between the United Kingdom and the Eurobloc will take place on December 31, 2020. Boris Johnson, British Prime Minister, is confident that no circumstances, including force majeure, will prevent this. However, many are unhappy with this situation both in the British government and in the European Union. According to Michel Barnier, the head of the EU negotiating group, the British authorities are delaying the process of negotiations on upcoming agreements planned for early 2021. M. Barnier notes that Great Britain refuses to decide the current ones,
According to economists, the disordered exit of the United Kingdom from the EU nullifies all the efforts of Parliament, which has blocked attempts to withdraw the country from the Eurobloc without a clearly defined agreement over the past three years. However, B. Johnson managed to avoid all obstacles and refused to extend the "transition period", believing that this option is optimal for the UK. Experts fear that in such a situation, the British economy may suffer more than in other developed countries, where pressure factors are much less.
The current situation increases the risks for the currency of the Foggy Albion. At the moment, the pound has to resist a number of traumatic factors, including not only the shaky economy, disoriented by the COVID-19 pandemic, but also the appearance of the specter of a chaotic Brexit. Thus, experts are confident that the pound will cope with this pressure in a short time, but the British currency can expect any surprises in a long distance.
