FX.co ★ Pound: A grand fall after gigantic growth efforts

According to analysts, last week was the worst for the British currency. Such tremendous losses for the pound have not been recorded since the election in December 2019. The new week also does not promise sterling recovery, which is already noticeable in its dynamics.

Experts believe that the reason for the collapse of the British pound is due to the high risk that the UK will not be able to agree on a trade deal with the European Union in the remaining 11 months before the end of the transition period after Brexit. This situation raises concerns among investors who are cautious about the pound and are not in a hurry to demonstrate a risk appetite. Earlier, UK's prime minister, Boris Johnson said that Britain did not want to obey the rules of the Euroblock. According to some experts, this makes the United Kingdom vulnerable and could deny other countries access to its largest export market.

Market participants are seriously concerned about Johnson's overly tough stance in trade negotiations with the European Union, which are scheduled to be completed before the end of this year. This is necessary in order to avoid a potential gap in trade relations between the UK and the Euroblock, experts emphasized.

Despite the current decline and the fact that the British currency showed the worst performance against both the euro and the dollar, it remains attractive for institutional capital. Some experts are confident that the decline in the pound is fundamental, and it remains overestimated.

The current collapse of the British pound is largely due to strong data on the US labor market. According to statistics, in January 2020, the number of new jobs in America was higher than forecasted which is 225, the number of people employed in the private sector also exceeded expectations at 206, and the unemployment rate increased by 3.6% compared to 3.5 % recorded earlier.

The current situation negatively affected the dynamics of the pound. As early as last Friday, January 7, the GBP / USD pair was trading within 1.2928–1.2929. According to experts, the 1.2900 bar has become an important psychological level, after the breakdown of which a downward trend has intensified.

On Monday, February 10, the pair went even lower, to the levels of 1.2883–1.2885. Experts note a steady movement in a downward spiral, which only stops seldom.

Experts added that in the medium term, the British currency may return to relative equilibrium, but this should not be expected in the near future. At the moment, the pound has again slid from its conquered positions, and its decline continues. However, experts rely on the further restoration of sterling and its resistance to geopolitical and economic upheavals.