26.02.202012:21 Forex-elemzések és áttekintések: Pound vs Dollar: time to gather strength

The dollar weakened slightly due to the expectations that the Fed may cut the rates in the near future. The pound, taking advantage of the situation, rushed into battle to gain a foothold in the positions. As a result, the British currency started to grow.

On Tuesday, February 25, the pound actively strengthened against the dollar. Strong support for the currency was provided by factors such as the gradual recovery of the British economy, and the possible easing of fiscal policy by Rishi Sunak, the new British Finance Minister. Analysts say that the pound took advantage of the favorable situation, thus, growing significantly. Moreover, the pound also began to regain its position because of the problems that other countries face.

Experts have recorded a gradual improvement of economic indicators in UK, after the parliamentary elections held in December 2019, as well as after Brexit at the end of January 2020. The current situation gives confidence to investors and businesses, after a prolonged period of uncertainty.

Yesterday, the pound updated local highs, but the upward trend in the GBP/USD pair did not last long. On Tuesday, the tandem cruised near 1.2951–1.2952, and then changed direction.

On Wednesday, the GBP/USD pair, which had previously returned to the area of the 30th figure and came close to the round level of 1.3000, once again slid down to the levels of 1.2960–1.2961. At the moment, the pair is trying to overcome the pull of the downward trend, which is again gaining momentum.

The driver of the pound's recent growth was the temporary ceasing of dollar purchases by the investors concerned about the active spread of the coronavirus. Earlier, mass purchases of the dollar dropped the pound. Now, the recovery of the currency was helped by the increase in risk appetite, recorded at the beginning of this week.

As a result, the British currency, having gathered its strength and added 0.2% to 1.2958, rose to the psychologically significant mark of 1.3000. Currently, the pound is busy preserving the conquered positions, but it is quite difficult to keep them.

Concurrently, this month, the British Finance Minister, R. Sunak, unknowingly extended a helping hand to the pound. The new head is expected to increase public spending in the budget, which will have a positive impact on the exchange rate of the national currency. The government spending plan will be presented on March 11, 2020.

At the moment, the attention of the market participants is focused on the upcoming negotiations between UK and EU, which will start next month. The key theme is the conclusion of a trade deal by the end of the post-Brexit transition period, which is scheduled for completion in December 2020. In the process of further negotiations, experts do not rule out a possible significant drop in the pound.