Tuesday, 27 October, 2020

Forex Market: GBP Falls below 1.24


Forex: Sterling falls again, expectations of future statistical improvement seem somewhat unrealistic at this point.

News of currency trends continues to emerge this week, and this time around the British currency is the one to watch.

The British Pound fell 0.8% against the Dollar on Friday, touching its lowest level in almost a month, with doubts about whether the UK will seal a trade pact with the European Union. These actions will be what cause the currency to gain more weight during the season.

The first half of 2020 has been full of unimaginable scenarios for the global economy. The coronavirus crisis has hit every area of the global economy hard. Affecting the foreign exchange market equally.

However, in the path that the UK has taken on its own, the health crisis has been just another stumbling block for the pound market. Since Brexit (the UK’s exit from the European Union), this once highly competitive currency has fallen.

Sterling is falling: was Brexit to blame?

The factors causing the fall in the price of the pound started more than a year ago.

Its first critical blow was in 2016, and since that referendum on the European Union, the pound has had several ups and downs. There was also another critical fall in 2019, when the first applications for Brexit were approved.

These reasons encouraged the UK scenario of economic slowdown before the Covid-19 crisis from the outset.

The UK’s currency has served during this transition period, like a temperature gauge, to gauge the opinions of citizens and companies.

Investors, business owners and currency users retreated. They were affected by the uncertainty caused by the decisions of the UK Prime Minister, Boris Johnson. Thus causing the steady decline of the pound sterling.

Sterling’s performance remains negative in the face of the global coronavirus crisis.
Sterling’s performance remains weak in the face of the global coronavirus crisis. Source: Reuters Graphic.
Given the clear negative results that Johnson generated with his shares in the price of the pound, he said that „the government does not comment on changes in the currency.

Adding to this, the dollar continues to be a tough competitor to currencies in the Forex market, displacing other currencies in this global crisis.

Forex Market: Dollar Maintains Short-Term Bullish Trend

An uphill climb
We have seen how the British economy struggled to stabilize after an aggressive economic depression, in pursuit of its economic dependence.

The coronavirus has also played its part in making the desired stabilization of the British economy more difficult. Allowing the British pound to fall short of its past ratings, generating more losses to the UK’s record economic depression.

Although the British economy is gradually reopening after the forced blockade of the coronavirus worldwide. Analysts are not changing their minds, and say that Brexit will remain the most important factor affecting the pound. Even four years after the country voted to leave the European Union.

British analysts had their expectations set on the economic interconnections between the UK and the European Union. These agreements would begin to be discussed in mid-March. Ensuring that both regions could maintain previous economic treaties, free passage between borders and tariff-free agreements.

This decision promised stability for the British currency, but in reality little progress has been made in agreeing the UK’s future trade relationship with the European Union bloc.

In that context, ING’s chief strategist in EMEA, Petr Krpata, said he expects the pound to fall further over the summer, touching 92.00 against the euro.