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26.09.2020 06:03 PM
GBP/USD. "Single-tasking" Boris Johnson. Part one

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The media and periodicals are very fond of talking about Boris Johnson, the Prime Minister of Great Britain. As early as the very first day of his reign, Boris Johnson showed a surprising resemblance to his American counterpart, Donald Trump. Johnson looks a bit like Trump (though he is younger than the American President), and behaves in a similar way in the political arena. Namely, it simply expels all those who do not want to obey him and his opinion, and in the international arena – conducts negotiations from a position of strength. Trump and Johnson have repeatedly called each other "friends". We have never heard Trump refer to any other world leader as a friend. He admired Xi Jinping, paid tribute to Vladimir Putin, calling him a "smart and strong leader", however, he did not call anyone "friend" except Johnson. The same goes for the British Prime Minister. We are interested in the most significant and odious figures of modern politics. Trump spent his entire presidential term walking on a knife's edge. The number of times he was impeached was probably not the total number of presidents in the entire history of the United States. He repeatedly "got involved" in scandals, made scandalous statements and generally looked more like a "ringleader" at some rally, rather than the president of a country with the strongest economy in the world. We have already listed the results of his 4 years of rule many times, and there are very few positive things and moments among them.

Boris Johnson is another matter. He still behaves a little more modestly, however, he still tries to match his American counterpart. We can only guess who told Johnson that this manner of doing business is a winning one. Johnson has been Prime Minister for over a year, and he also has nothing to brag about. Moreover, like his "friend", he also completely failed the fight against the "coronavirus" that caused a storm of indignation in the UK. Of the merits, Johnson can only be credited with completing the Brexit epic. However, how and at what cost? The price of the British, who chose Johnson as head of government (and, unfortunately, those who did not), will find out very soon. Namely, in 2021, Britain will start trading with the European Union under the rules and regulations of the WTO. Although it can also be said that the British have been paying the price for Brexit for four years. They just started paying more under Boris Johnson. The British Prime Minister not only failed to reach an agreement with the European Union on a free trade agreement, but also intends to completely spoil relations with the alliance, which will put an end to any future negotiations, as well as greatly damage the UK's reputation in the international arena. Why is Johnson better than the same Theresa May, who resigned because parliament refused to approve her agreement with Brussels three times? May at least tried to negotiate. Johnson, from the first day of his rule, simply stated that there would be a "hard" Brexit and has been on this path for more than a year, sometimes pretending that he wants to negotiate with the Europeans. We would venture to assume that there was talk of a "divorce" with the EU soon, the majority of Britons still meant a civilized "divorce", after which they and the Europeans will remain in good relations and will be able to peacefully and mutually beneficial co-exist in the future. But 2020 shows that this option is unlikely. In addition, Johnson also failed to agree on a trade deal with the United States, however, his friend Donald Trump may leave his post in January 2021 and then have to negotiate with Joe Biden, who highly honors the Belfast Agreement of 1998 and condemns London's potential violation of agreements with the European Union concerning Northern Ireland.

However, let's look at the whole situation and what it can lead to from the very beginning. Recently, the British tabloids began to mercilessly and sarcastically criticize the British Prime Minister. The reason is banal and simple. In the UK, the second "wave" of the COVID-2019 epidemic began. As Boris Johnson himself stated. "Boris Johnson is moping", "Boris Johnson is confused", "Johnson lets Britain drift to another lockdown" - these are the newspaper headlines of the last week. Many British media outlets now have started calling Johnson's election victory exclusively "Brexit". We've been talking about this for the past year. This name suggests that the British in December last year in the parliamentary elections did not vote for Johnson and the conservatives, but for the early completion of Brexit. This is the only factor that brought Johnson to the Prime Minister's seat and the only factor that gave him the opportunity to form a "majority government". Naturally, Johnson bloomed like a "peony in hot June", making pretentious statements that "the era of Britain will soon come". At that time, Johnson seemed to strongly believe that he could conclude trade agreements with all countries of the world, without looking at Brussels, that with America and Donald Trump, he would be able to conclude an agreement that would completely offset the losses from leaving the European Union. Serious cooperation with China was also planned, plus we should not forget that London is still one of the main financial centers of the world, although until recently it was the largest. Thus, the prospects of Boris Johnson painted a very rosy picture. However, almost all of Johnson's global plans collapsed in the first year of his Premiership, and the further Johnson leads the country, the more fears appear for this country.

Of course, Johnson and the company were seriously "confused" by the "coronavirus". However, it confused the maps of many countries of the world and almost all EU countries left the first "wave" with GDP losses of less than 20%, unlike Britain. Also in the midst of the first "wave", it turned out that London sold medical supplies to China at the beginning of the year, and then faced a shortage of these medical supplies. It also later became clear that many stocks of protective equipment and medicines in British warehouses have long expired and are not suitable for use. All this led Britain to the first place in Europe in terms of the number of deaths from COVID-2019.

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Recommendations for the GBP/USD pair:

The pound/dollar pair continues its downward movement. In the 24-hour timeframe, traders managed to lower the pair to the area of the Senkou Span B line and even overcome the Ichimoku cloud. However, the further movement of the pound depends entirely on the fundamental background from the UK. Overcoming the support level of 1.2683 will increase the likelihood of further movement to the South. However, do not forget that the fundamental background in the United States is also far from the most optimistic. Therefore, the US dollar may again begin to fall in price.

Paolo Greco,
Analytical expert of InstaForex
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