21.01.201914:26 Forex Analysis & Reviews: Pound chaos will not scare

The British pound does not get tired of confusing those who are watching him. If recently it was thought that the polar results in the form of a soft or erratic Brexit could lead the pair GBP / USD to 1.45 or 1.15, then in 2019, the increased likelihood of the second scenario, to the surprise of investors, triggered a five-week rally of the analyzed pair. Of course, the US dollar was weakening before our eyes, but the fact that the value of sterling options with maturity dates is falling by the end of March indicates that there is no particular concern about Britain's exit from the EU.

In my opinion, the successes of the pound are due to the increased chances of a second referendum or the extension of the term of Article 50 of the European Union Code governing the withdrawal of any country from its structure. Previously, the date of the official divorce of Albion with the EU was considered March 29, but in fact, the term, at the request of London, can be changed. So, Britain will gain time to find a compromise with Brussels or to hold a second referendum and save its place in the European Union. Messy Brexit is not in fashion now, although it's premature to talk about improving the political landscape. If Theresa May's Plan B turns out to be very similar to Plan A and cannot pass the Parliament, then the Laborites will have the opportunity for a second vote of no confidence. The defeat of the Prime Minister will increase the risks of early elections, increase the volatility of sterling and put pressure on the bull position on GBP / USD.

The policy continues to hang like pounds on the legs of the fans of the pound, because, return to the economy and to the markets of Albion, certainty, underestimating sterling from a fundamental point of view would play into the hands of buyers. The slowdown of British inflation in a strong labor market and the steady growth of average wages leads to an increase in real incomes of the population and creates prerequisites for the expansion of consumer activity and GDP.

The dynamics of average wages and inflation in Britain

At the same time, the reduction of political risks will contribute to an increase in business activity and capital investments, which will have a positive effect on the economy in the future. Simply put, the pound has a very serious hidden potential, and Goldman Sachs does not in vain call him the current year's favorite among G10 currencies. According to the bank, the pair GBP / USD can rise to 1.36 within 12 months. Blomberg experts believe that the sterling will be among the top three performers after the Norwegian and Swedish crowns.

Obviously, the weakness of the US dollar will not do. While the US currency continues to support strong indicators, including industrial production, the USD index feels confident. However, disabling the government, traditionally bad weather for this time of the year, and fading fiscal stimulus effects will contribute to an increase in GBP / USD.

Technically, the "bulls" in the analyzed pair do not lose hope for the implementation of the target by 88.6% in the "Shark" pattern. A prerequisite for the continuation of the rally is to update the January maximum.

GBP / USD, the daily graph