29.10.202010:05 Forex Analysis & Reviews: Pound is declining more than it is rising before the US elections

Similar to the US dollar, the British pound is sensitive to the current global financial state of the market. In this regard, the pound is primarily declining before the US presidential election, which is making experts worry.

This week, the pound has been trying to break through the pull of the downturn, which ended unsuccessfully. Yesterday, the GBP/USD pair clearly declined, losing 40 points and returning to the support level of 1.3000. It dropped to 1.2980 in the morning, but moved quickly to the conquered highs. Today, the GBP/USD pair was trading in the range of 1.3008-1.3009, trying to recover previous losses.

On another note, the market is currently waiting for the next round of negotiations between London and Brussels. Brexit, in turn, and all the nuances associated with it are still in the process. It should be noted that both parties are lacking time to conclude the negotiations, since the transition period for it ends at the end of December 2020. However, analysts believe that there will be no positive changes, even if there will be positive results taking into account prevailing negative factors. These include the economic damage from the COVID-19 and the significant UK trade deficit.

The US dollar's moderate recovery also exerts pressure on the pound. Its dynamics went into a hard path ahead of the presidential election – investors greatly refused to buy USD, increasing market volatility. This is because the result of the US elections is a global issue and unpredictable. Experts allow the most unlikely scenarios, one in which is that no candidate gets a majority of votes. The current situation keeps the market in tension, which causes risk appetites to fall and market participants have to reduce their US dollar's positions.

It can be recalled that as this week started, moderate support for the dollar was provided by fairly positive macro statistics from the United States. In the first month of autumn, durable goods orders rose by 1.9% yoy, which is much more than the growth by 0.4% yoy recorded in August. The USD received unexpected help due to the uncertainty associated with the upcoming US elections, as well as growing concerns about an increase in the incidence of COVID-19. Experts say that these factors have boosted demand for safe-haven currencies.

Experts agree that we should not expect the pound to rise in the near future. It is possible that it will have to face the strongest volatility before the US presidential election. An additional factor in the "compression" of the GBP dynamics is the lack of positive news on Brexit and a positive decision by the US Congress regarding new incentives. This cumulative negative pressure is becoming a downward driver for it. Therefore, analysts believe that only sellers of the GBP/USD pair win, but it will be temporary.