21.01.202010:23 Forex Analysis & Reviews: Is pound trying to catch the departing train?

The British currency is still in a downward trend, despite all efforts made. Experts believe that there is no way out of the impasse caused by the long-term downturn until the end of this month. However, the pound is still trying to grow, and from time to time its efforts are rewarded.

At the beginning of this week, analysts recorded the increased volatility of the British pound", which has recently begun to decline. Weak macroeconomic statistics from the UK constantly puts the bandwagon on sterling, as a result, the GBP/USD pair is steadily sinking. A report that was released last Friday provided disappointing retail sales information for Foggy Albion, where instead of the expected growth of up to 2.6%, a collapse of up to 0.9% was found. According to the document, the volume of retail sales in the country decreased by 0.6%, in December 2019. As a result, sterling rapidly went down, demonstrating high volatility in the GBP/USD pair.

On Monday, January 20, the GBP/USD pair was in a constant struggle for the opportunity to get into an upward trend. The pair quotes ran near 1.2969–1.2970, making attempts to rise.

In an effort to get into the outgoing train of growing quotes, the pound made a lot of efforts, and he managed to rise to 1.2988. However, this was preceded by a wave of falls, which overtook him the next day.

The following day began quite positively: the British currency moved up, reaching the level of 1.3011. However, the climb was short-lived and the downtrend took its toll.

Subsequently, the GBP/USD pair slipped to the levels of 1.3002–1.3003, failing to maintain their positions. Now the pound is again trying to jump into the last car, fighting for the psychologically important level of 1.3000.

According to analysts, if the British currency fails to gain a foothold above 1.3000, it will again be at the point where the upward movement began. In this case, returning to the initial level is equal to trampling on the spot, experts reassured. The downward spiral, which hit the pound in early January 2020, turned out to be a kind of trap from which it is difficult to get out.

The oil is adding fuel to the geopolitical problems facing Britain. According to experts, the upcoming negotiations between London and Brussels will be complex and controversial, and their outcome may be unpredictable. They also added that if an agreement with the European Union is not reached, this will put an end to an orderly Brexit. At the same time, the British authorities, Prime Minister Boris Johnson, in particular, need to solve problems with Gibraltar, Scotland, and Ireland. Border issues with Gibraltar and Northern Ireland have long been on the agenda, exacerbating the already difficult geopolitical situation.

According to experts, the future of the British currency largely depends on the course of trade negotiations between the United Kingdom and the United States and the European Union. Here, the UK was caught between two fires. Earlier, US President Donald Trump supported his desire to leave the eurozone by promising London an "unprecedented" trade deal, and the EU leadership again invited the country to remain in the euro block. Both decisions diverge from the plans of Johnson, striving to "reset" economic and political relations with the EU. According to analysts, the success or failure of negotiations on both fronts will significantly affect the dynamics of the "British pound". It is possible that the pound will grow from time to time, however, experts predict deep drawdowns.

The publication of statistics on the labor market of Foggy Albion, from which experts do not expect impressive results, can knock the ground out under sterling. According to experts, the unemployment rate in the country is likely to remain the same, and employment may increase by 95 thousand people. They also expect a reduction in the number of applications for unemployment benefits from 28.8 thousand to 26 thousand. However, the growth rate of the average wage in the UK may slow down from 3.5% to 3.3%, and this will negate the relatively positive nature of data on the labor market.

According to experts, attempts by the pound to catch up with the outgoing train of growth in quotes sometimes bear fruit, but more often remain unsuccessful. The British currency can not get out of the web of a downward trend ahead of the upcoming decisions on Brexit. However, in the medium term, analysts are counting on the restoration of sterling, which will have to withstand the pressure associated with the UK's exit from the European Union.