24.09.202015:10 Forex Analysis & Reviews: GBPUSD and EURUSD: A new employment assistance program has been announced in the UK. Will this help the pound?

The British pound rose against the US dollar after the British Finance Minister announced the government's plans to support the labor market, which is now in effect. Let me remind you that the current employment preservation program in the UK will end at the end of October this year, and many households were afraid of their future due to the risk of problems with getting to work and finding employment against the background of the second wave of the coronavirus pandemic.

Since the spring of this year, significant support for employment in the UK has been provided by the job retention program, which will end in October this year. About 7.5 million workers, who are mostly employed in the private sector, were sent on forced leave with a salary from the state. The government has repeatedly drawn the attention of employers to the fact that it plans to share payments with them in the future, which eventually happened. At the beginning of August of this year, many previously dismissed employees, as well as those sent on paid leave, have already begun to return to part-time work, which was the starting point for the new program.

A new employment assistance program from the government will now cover almost a quarter of the pay of workers who are employed on a part-time basis, according to today's statements by British Finance Minister Rishi Sunak. The new program will operate for six months starting from November 1 this year. All those who were on paid leave must either partially return to work or find a new one where they can work part-time.

According to Rishi Sunak, the steps taken will mimic the current German Kurzarbeit scheme, which supplements part-time pay. Employees will need to work at least a third of their normal working hours to be eligible for payments. Of the remaining two-thirds, the employer will pay 33%, and another 33% will be repaid by the state. In total, employed people will be able to receive up to 77% of their monthly salary. Sunak also noted that the new program applies only to small and medium-sized businesses. Larger enterprises and companies can only expect to receive such payments if they can prove that their income has significantly decreased during the coronavirus pandemic and their turnover has decreased.

Also, those employers who did not use the paid leave scheme for their employees will be able to count on partial salary coverage from the state. As for those who are out of work, the amount of benefits and support from the state will be expanded, but only if the applicant failed to find a job in the next few months from the start of the new assistance program.

At the end of his speech, Sunak noted that the new employment support policy is unprecedented, which the government has never used before. As for the abolition of VAT for the tourist business, this measure will continue until the beginning of next year.

The British pound reacted with growth to this news and kept from falling to new monthly lows. So far, the fight is for the resistance of 1.2775, and the further direction of the pair will depend on who will be stronger at this level. It is likely that an upward correction in the trading instrument, which has been brewing for quite some time, may take a larger turn, although there is very little hope for this, given the difficult situation the UK is currently in due to the risk of quarantine and problems with the Brexit trade agreement. Most likely, the market reaction to the strengthening of the British pound will be temporary. A break in the support of 1.2700 will lead to a new and larger wave of sales of the British pound with an exit to the lows of 1.2640 and 1.2580

EURUSD

As for the European currency, the data that was published today in the first half of the day did not add optimism to buyers of risky assets, as it indicated a slowdown in the economic recovery. The report said that the German economic recovery is now moving into a phase of "slowing or developing", but not active. Although in the third quarter, we saw a V-shaped rebound in the German economy. However, in the autumn period, the dynamics are fading due to the uncertainty that directly depends on the development of the situation around the virus and the COVID-19 vaccine.

According to a report by the Ifo Institute, the German Ifo business sentiment index rose to 93.4 points in September 2020 from 92.5 points in August, while economists predicted that the index would be at 93.5 points in September. The index, which reflects companies' assessment of their current situation, jumped to 89.2 points from 87.9 points in August, while the expectations index was 97.7 against the August value of 97.2 points. All indices turned out to be worse than economists' expectations, which made it more difficult for euro buyers to build an upward correction of the pair in the first half of the day.

As for the technical picture of the EURUSD pair, the bears are still in full control of the market and the breakthrough of the next support in the area of 1.1645, which has already taken place, may lead to a new wave of decline in risky assets. The nearest target for sellers will be the area of 1.1585, where it will be possible to observe profit-taking on short positions after the downward trend formed this week. But what should also be noted is the fact that EURUSD left the side channel. And this output is made in the direction of reducing the euro. In the medium term, the bears will aim for the levels of 1.1540, 1.1425, and 1.1370. But, most likely, the bulls will try to regain control of the market by building an upward correction to the large resistance of 1.1740, on which the further movement of the pair will depend. At this level, euro sellers will be particularly active, who will wait for the fall decline in risky assets against the background of the spread of the coronavirus epidemic.