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#1 16-09-2020 10:13:49

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3095

GBP/USD: declining UK unemployment figures put an end to pound decline

GBP/USD: declining UK unemployment figures put an end to the pound's decline

In a market characterised by narrow ranges and little or no volatility, the British pound (GBP) stood out. Last week it fell dramatically, as Friday's sell-off pushed the EUR/GBP pair to near 0.93, while the GBP/USD pair dropped below 1.28. The GBP/USD has been in a very volatile trading range since last week's trading session.

This occurred against the backdrop of the GBP/USD trading near 1.35 at the end of last month, making this drop impressive. It all started when the UK was ready to break international law for the Brexit divorce, sending a negative message to the financial markets. Naturally, the pound sterling suffered in all areas, with investors seeing any rise as just another excuse to sell it.

The Bank of England is due to deliver its monetary policy this week, so the GBP could find support before it does. In the meantime, sterling pairs have found support from an unexpected source: the monthly unemployment number.

Last month's data is a pleasant surprise

For last month, the change in the number of claimants was expected to reveal almost 99,000 new people claiming unemployment benefits. Specifically, the market expected 100,000, but the actual number was 74,000. In addition, the previous figure released a month ago was revised downward from 95,000 to 70,000. A double positive for the British economy, ending the GBP's decline.

However, the GBP remains weak. It is still trading above 0.92 against an exceptionally strong EUR and has fallen aggressively against the CHF, a safe-haven currency. It is increasingly trading as the currency of an emerging market, a feature observed since last year.

This week, the Bank of England is not expected to change the situation for the GBP. On the contrary, the main driver for the GBP is the Brexit divorce and the way things are going between the two parties.

After the UK announced its intentions, the European Union retaliated. It made it clear that it would make its decision on the euro clearing system (currently in London) by the end of this month.

If this game of retaliation continues, the GBP will end up being one of the most volatile currencies on the forex dashboard for the rest of 2020. Coupled with the November U.S. elections, it is likely that the currency market will move on different data than the economy.

For now, the 1.29 level seems to be the pivot of the GBP/USD - the most important GBP pair. It is expected that the market will continue to cross it until things become clearer regarding the Brexit situation.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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