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29.06.2020 04:57 PM
GBP comes under pressure

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Today, the pound sterling is coming under strong pressure due to the UK government reorganization.

In the morning, the British national currency failed to go far from its monthly lows and after a slight pullback started to test those values again. Moreover, even the weaker US dollar did not support the British currency.

The pound came under pressure after the British Prime Minister stated that the authorities were planning to double investment costs. According to Boris Johnson, a return to a saving regime is out of the question, since the state should focus on a quick recovery from the crisis triggered by the COVID-19 pandemic.

In support of Johnson's words, the country's interior minister said yesterday that the authorities would be ready to reveal a new list of infrastructure spending on Tuesday.

Recall that earlier, the pound reacted quite positively to the news on increased infrastructure spending in the UK. But now the question of a trade agreement with the EU arises. It may change the pound's trend. This week, investors focus largely on trade negotiations between Britain and the European Union, which leaders cannot reach an agreement due to a great number of disputes and differences.

If the agreement is reached, the pound sterling is likely to gain ground significantly. Meanwhile, it is suffering losses against the already weak US dollar.

In the morning, the pound was trading at the level of 1.2324. Notably, the US national currency dipped amid fears of a second wave of the coronavirus pandemic, as evidenced by a significant increase in the number of new cases in the United States.

The pound also lost ground against the common European currency. The British currency declined by 0.3% to 91.20, the lowest value since the end of March this year.

One way or another, until the EU and UK are able to agree, disputes between the wto sides are expected to continue to exert some downward pressure on the currency, dragging it down. Moreover, the escalating internal conflict in the government only exacerbates the situation.

Maria Shablon,
Analytical expert of InstaForex
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