Although the decline in the pound was gradual and stretched over time, its scale is still impressive. Whatever one may say, this is the strongest daily decline in a long time. There are many reasons for this, but only two are worth highlighting, and both are linked to the coronavirus pandemic. First, there is the ongoing talk about the possibility of a so-called "vaccine embargo" that the European Union may impose on the UK. We are talking about stopping the supply of the vaccine to the United Kingdom from the European Union. The fact is that although the AstraZeneca vaccine is British, it is produced mainly in Belgium. It is there that the largest production of the AstraZeneca vaccine is located. The reason for this measure is that the European Union is extremely unhappy with the fact that the vaccine is being delivered to the UK as a priority, and not to the countries of the European Union. Although in the terms of the contracts signed by the countries of the European Union with the manufacturer, there was a separate clause about deliveries to the territory of continental Europe. Secondly, there is almost no doubt that Europe will not just extend the quarantine measures, but may even tighten them. In the UK, things are not going well. And if the "vaccine embargo" is added to this, the situation will become absolutely terrifying. In general, these two related factors are clearly weighing on the pound.
These factors were so large and significant that they overshadowed everything else, including relatively good data on the labor market. After all, the unemployment rate in the UK fell from 5.1% to 5.0%. Although, at best, they expected that it would remain unchanged. It is true that there are still quite a few questions in this data, but no one wants to deal with them now. There are more serious problems than the inconsistencies of the British statistics on the labor market.
Unemployment rate (UK):
However, the pound may well recoup some of its losses today. At least for a while. The reason will be inflation, which should rise from 0.7% to 0.8%. However, the positive effect will be extremely short-lived, and not so strong. Largely for the reason that the above negative factors are much more significant, and will continue to exert pressure for some time. There are also growing concerns about rising inflation risks. The growth of inflation may get out of control, and then the monetary authorities will no longer have to deal with the issues of inflation growth to certain target levels, but with its reduction.
Inflation Rate (UK):
The GBP/USD currency pair successfully updated the local minimum of the correction move of 1.4224 --> 1.3836 during the previous day, as a result of which sellers had a chance to further weaken the value of the pound sterling.
The market dynamics is growing rapidly, this fact is confirmed by both the structure of candlesticks and the coefficient of speculative operations.
If we proceed from the current location of the quotes, the market participants are already following in the area of the value of 1.3700, while maintaining a downward interest.
Considering the trading chart in general terms, the daily period, it is worth highlighting the correction move from the peak of the medium-term trend of 1.4224, which reached a scale of 500 points.
In this situation, we can assume that a rapid downward move could already lead to overheating of short positions, which will lead to a local stagnation-a pullback, relative to the current quote. If the price remains below 1.3700 in a four-hour period, speculators can again capture the market, which will lead to a further weakening of the British currency in the direction of 1.3600.
From the point of view of a comprehensive indicator analysis, it can be seen that technical instruments, due to an intense downward movement, unanimously signal a sale.
