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The sagging pound: between the hammer of lockdown and the anvil of growth

The sagging pound: between the hammer of lockdown and the anvil of growth

The sterling has been in limbo for a long time, trying to gain momentum for growth amid positive news about the successful vaccination against COVID-19. However, on Wednesday, April 7, the pound dropped sharply due to profit-taking by market players.

Experts fear that the pound's hopes for further growth will be in vain. Earlier, the driver of its rise was the news about the successful immunization of the population from COVID-19 and the high probability of curtailing the next lockdown. According to the latest data, at the beginning of next week, from April 12, the UK is expected to partially lift the coronavirus restrictions. The exemptions apply to visits to some public places. Against this backdrop, the British FTSE 100 index increased by 1.3%, reaching its highest value in the last three months.

On Wednesday, April 7, the sterling sank 0.03% against the US dollar, to 1.3819-1.3820. According to analysts, the GBP/USD pair is dominated by bearish sentiments, which are unlikely to be replaced by bullish ones in the near future. Strengthening of the "bearish" trend is possible in case of a breakdown of the powerful support level of 1.3819. The implementation of this option will open the way to 1.3766 and below, experts are sure. If fortune smiles on the bulls, their targets in the GBP/USD pair will be the levels of 1.3902 and 1.3960.

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The sagging pound: between the hammer of lockdown and the anvil of growth

In the first quarter of 2021, experts recorded a strong growth in the British currency. This prompted traders and investors to actively take profits. As a result, sterling slipped to a weekly low against the USD, as well as to its lowest two-week level against the euro. Analysts consider the current losses of the pound to be the worst in the last five weeks.

In early April, the British currency strengthened along with the euro, but experts are confident that the sterling's rise is largely due to the dollar's weakness. Further strengthening of the latter is also questionable.

At the beginning of this year, sterling showed growth against the backdrop of a fairly successful vaccination against COVID-19, ahead of the eurozone countries in terms of this indicator. In the past quarter, experts recorded the steady growth of the sterling, but they fear an increase in negative sentiments towards it and the British economy.

Currently, the economic outlook for the UK looks better than that of the eurozone countries. This is largely facilitated by the easing of quarantine restrictions, while in Germany, for example, the authorities are calling for a nationwide lockdown. This will give a head start to the sterling, which may overtake the euro. An additional factor of support for the GBP is the optimistic forecast for the country's GDP, which will increase by 4% by the end of 2021. Experts expect the British economy to return to pre-crisis levels by mid-2022, that is, six months earlier than previously predicted.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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