Pound Sterling is expected to be more volatile in the coming weeks as the uncertainty hovering around Brexit and UK economic outlook.
Brexit process are weighing heavily on the cable as the successive rounds of negotiations fail to deliver any significant progress as time runs out. With the transition period expiring on January 1, 2021, the odds of a no-deal exit from the Union are increasing by the day.
To add up, coronavirus shutdown in the UK has immensely impacted the British GDP as it has contracted almost quarter from year-on-year comparison, which has directly increased negative pressur on the GBP.
Also to note, ahead of the Bank of England (BoE) meeting it has been confirmed that the UK economy collapsed by a record -20.4% in April. It will reinforce expectations for the BoE to announce further policy easing as soon as next week. At this stage, we expect the BoE to favour a further expansion of asset purchases with the current purchase plan of GBP200 billion set to run out. The GBP reaction is likely to depend more though on any update on the BoE’s latest thinking on negative rates. The GBP could stage a relief rally if the updated BoE communication does not reinforce negative rate speculation, and vice versa.
Key Trading Plan:
i) SHORT when the price has pulled back up to the price level 1.26254 with the take profit 1 at 1.24648 and take profit 2 at 1.22893.
ii) LONG when the price breaks the resistance level of 1.26569 with the take profit point at 1.28682.
Author:
S.I.D. Aizu
Brexit process are weighing heavily on the cable as the successive rounds of negotiations fail to deliver any significant progress as time runs out. With the transition period expiring on January 1, 2021, the odds of a no-deal exit from the Union are increasing by the day.
To add up, coronavirus shutdown in the UK has immensely impacted the British GDP as it has contracted almost quarter from year-on-year comparison, which has directly increased negative pressur on the GBP.
Also to note, ahead of the Bank of England (BoE) meeting it has been confirmed that the UK economy collapsed by a record -20.4% in April. It will reinforce expectations for the BoE to announce further policy easing as soon as next week. At this stage, we expect the BoE to favour a further expansion of asset purchases with the current purchase plan of GBP200 billion set to run out. The GBP reaction is likely to depend more though on any update on the BoE’s latest thinking on negative rates. The GBP could stage a relief rally if the updated BoE communication does not reinforce negative rate speculation, and vice versa.
Key Trading Plan:
i) SHORT when the price has pulled back up to the price level 1.26254 with the take profit 1 at 1.24648 and take profit 2 at 1.22893.
ii) LONG when the price breaks the resistance level of 1.26569 with the take profit point at 1.28682.
Author:
S.I.D. Aizu
