28.01.202012:45 Forex Analysis & Reviews: Stunning pound bends

The beginning of this week did not bring positive changes to the British currency. The pound is still losing ground and then recovering with difficulty. The situation in the UK related to the upcoming signing of documents on Brexit this Friday, January 31, keeps the market in suspense and does not allow the national currency to rise.

According to analysts, a bearish trend has formed around the British currency. Experienced "bears" are not afraid to go against the "bullish" market trend, looking for an opportunity to sell sterling profitably. Sellers became more active when statistics on UK business activity for January 2020 came out. Recall that at that time a rapid increase in the composite index of procurement managers over the past two years was recorded. As a result, the pound soared to $1.3180, and then abruptly went down.

Dizzying roller coasters of the British currency were noted at the end of last week. Last Friday, January 24, sterling showed miracles of acrobatics bouncing to 1.3140 and slipping to 1.3100 and below. According to analysts, such changes in the dynamics of the "British pound" have repeatedly baffled the market.

On Monday, January 27, the pound tried to maintain balance plying within the range of 1.3064–1.3065. Throughout the day, the GBP/USD pair succeeded, however, later on, luck turned its back on the tandem.

Morning of January 28, the pair were disappointed as the pound sank to 1.3036, showing a tendency to slide to low values. Experts' fears were confirmed as the GBP/USD pair did not cease in its fall. Note that the range of 1.3035–1.3036 was the immediate goal of the bears, where they were recommended to take profits.

Subsequently, the tandem slipped to 1.3022, trying to find the bottom. For a short time, the pair slipped to move down with renewed vigor and at the moment, it has nevertheless gone to the bottom, sifting to a critical level of 1.3014. A further fall could result in extremely negative consequences for the pound, analysts emphasized.

Oil in the fire adds a high probability of reducing repo rates by the Bank of England. It is possible that the regulator will decide on this step at the upcoming meeting on Thursday, January 30. Another traumatic factor for the pound is the Damocles sword to reduce interest rates. This measure is supported by recent disappointing statistics on inflation and retail sales in the UK. A spoonful of honey in the barrel of this tar was strong data on the labor market in the country and the level of business activity, thanks to which the sterling rose slightly.

The decision to reduce the repo rate in January of this year was discussed earlier. Experts believe that such a measure will restrain the steady weakening of the monetary policy of Great Britain. According to analysts, even lowering the repo rate will not deprive the "British pound" of such a trump card as the inflow of foreign capital. At the same time, the Rabobank currency strategists, fixing noticeable short-term fluctuations of the GBP / USD pair, do not attach any special significance to them. Experts are sure that the impressive turns of the British currency will not lead to drastic changes, and in the medium term, the pound will find the long-awaited balance.

Analysts stressed that the constant source of pressure for the British currency is the tense situation around Brexit. Recall that at the end of this week, January 31, a procedure is planned related to the UK leaving the EU and signing the relevant documents. The result of this meeting will significantly affect the further dynamics of sterling, experts reaffirm. However, in the event of an unfavorable outcome, it will sag even more than the current level, experts warn.