22.10.202008:44 Forex Analysis & Reviews: How long will the growth of the pound last?

The pound is making an unusual upward movement, which is inspired by the possible continuation of the Brexit negotiations. However, experts warn that this growth will be temporary.

Last night, reports about the likely continuation of the negotiations between London and Brussels excited the markets. As a result, the pound received an impulse, letting it break through the level of 1.3100 and rose to 1.3155. Today, the pound slightly slowed down, but tried to hold on to most of the earned position. Currently, the GBP/USD pair is trading near the range of 1.3132-1.3133, finding a way to re-enter an upward turn.

The pound started to strengthen this Wednesday, when the GBP/USD pair reached an intra-week high. At the moment, it is at the peak of the last six weeks, showing an unusual rise. In addition to the possibility of resuming Brexit negotiations, the driver of this growth was the positive inflation data from the UK. The annual inflation rate in the country has gained momentum, which pleased the market. However, for the Bank of England, this was not a reason to review the current extra-soft monetary policy. On the contrary, the regulator does not exclude the introduction of new incentives against the background of downside risks caused by growing unemployment.

Analysts are confident that tomorrow will be positive for the pound, since the European and British leaders are ready to compromise. According to Bloomberg, the UK and the EU are planning a new trade agreement by mid-November. Michel Barnier, a negotiator for the European bloc, said that a trade deal with London is quite possible, despite Boris Johnson's tenacity on a number of key issues.

Mr. B. Johnson's statements earlier about their readiness for Brexit without a deal were ignored by the markets, hoping that he would make concessions in order to reach a compromise. However, the British Prime Minister is not in a rush to cancel those points of the bill on the internal market that are recognized as controversial and contrary to the agreement on withdrawal from the Eurobloc. Moreover, Dominic Raab, the Minister of Foreign Affairs of Great Britain, supports him on some issues. The politician emphasizes that London is disappointed with the demand of Brussels to make additional concessions to conclude a new trade deal.

On the other hand, Mr. Barnier's statements turned out to be like a detonator that blew up the market. Many impatient traders began to actively buy the pound, which supported it to gain a new peak at which it is enjoying the victory. The intensity of geopolitical tensions is reducing, which also led to the pound's growth. Previously, geopolitical problems between the European Union and Great Britain limited its growth, not allowing it to go beyond the existing framework. At the same time, the pound received additional support from the upward trend in the commodity market, as it correlates with oil prices.

Currency strategists believe that the pound should not rely on a long-term rise, as it is possible that it will start declining again in the near future to be able to rebound and rise again. Experts say that such turn of events are possible before the US presidential elections take place. Given the unstable dynamics of this currency, it is easily influenced by any political events.