A sharp rise in the number of new cases of coronavirus infection sent the pound into free fall. Prime Minister Boris Johnson made an address to the nation last night. He announced new restrictive measures, many of which were known a day before. In particular, bars and restaurants will now only be open until ten o'clock in the evening, and orders can only be accepted at tables. In addition, all employees in bars, restaurants and shops are required to wear masks. Also, fines for violation of anti-epidemiological measures are significantly increased. The minimum fine is now £200. The maximum amount of the fine can be up to 10,000 pounds. In addition, more than six people are prohibited from gathering indoors. Exceptions are made only for weddings, where up to 15 people can gather, and funerals, which can be attended by no more than 30 people. And all these measures are introduced for at least six months. The British prime minister has once again called for everyone to work remotely from home. And given the dynamics of the spread of coronavirus, authorities will not be limited to these measures. Apparently, restrictive measures will only get tougher. And it is quite obvious that small and medium-sized businesses will incur huge losses, even from the measures that will be introduced starting tomorrow. Investors do not believe in the possibility that the business will survive a second quarantine and are trying to get rid of the pound.
If we talk about macroeconomic data, which are now generally of no interest to anyone, then home sales in the secondary market in the United States grew by 2.4%, which turned out to be much better than forecasts of 0.9%. But even if there was no coronavirus pandemic, these data still would not have affected the situation. Although the data is generally positive, and the dollar is growing. But it grows for other reasons.
Existing Home Sales (United States):
Preliminary PMI data are due in the UK today, and forecasts are disappointing. The index of business activity in the service sector should fall from 58.8 to 55.1. The manufacturing index may decline from 55.2 to 53.8. As a result, the composite PMI is expected to decline from 59.1 to 54.9. However, given what is happening in the UK, the indices may decline much more.
Composite PMI (UK):
A decline in business activity indices is expected in the US. In particular, the index of business activity in the service sector should decrease from 55.0 to 54.1. Manufacturing index from 53.1 to 53.0. The composite PMI is expected to decline from 54.6 to 53.0. Take note that the scale of the decline in US indices is less than in the UK. In fact, the decline could be much larger in the United Kingdom. Not to mention the fact that anyone is hardly interested in all of today's data. The main topic is the dynamics of the spread of the coronavirus epidemic.
Composite PMI (United States):
The GBP/USD currency pair, on the wave of downward interest, managed to overcome the important price level of 1.2770, which previously kept sellers from declining further. A consistent downward move can theoretically lead to a change in the price trend in the medium term.
Based on the quote's current position, you can see the price settling below the 1.2770 level, where the low is currently at 1.2710. Based on the local stop, we can assume that the market is in the phase of price taking at new levels.
There is a consistently high indicator of dynamics relative to volatility, which indicates an extremely high level of emotional behavior of the market.
Considering the trading chart in general terms, the daily period, an attempt to change the price trend from rising to descending is visible.
We can assume that the main prospect is to consider that the pound would fall in the direction of 1.2600-1.2500. Alternative scenarios may lead to price taking at new levels, in which case a temporary range of 1.2710/1.2790 may occur.
From the point of view of a comprehensive indicator analysis, we see that the indicators of technical instruments on the hourly and daily periods indicate sell positions since local lows are updated.