UNITED KINGDOM – The Pound sterling is showing signs of recovery after its post-election drop. The GBP/USD pair is exchanging higher while the GBP/EUR is also advancing.
The British Pound (GBP) performed poorly against the US dollar (USD) and the Euro (EUR) on Monday as worries of a no-deal Brexit resurfaced. Exchange rates for both the sterling and the euro were muted because of the holidays. The dollar also traded lower against the euro but performed better against the pound.
Analysts have predicted that rates for the three currencies will remain flat on Christmas and that no significant changes will happen this week.
The USD index (DXY) is facing major resistance and could drop lower after performing well these past two weeks. The lower turn could result in a rally for the GBP/USD after a week of pressure. The pair was able to break out from the downward tend that has afflicted it for a week.
While it could be a sign that the GBP/USD is gearing up for a reversal, analysts are saying that it would be safer to wait for liquidity to return to the markets. Traders should also be cautious since banks are on holiday and currencies will be trading in limited ranges this week.
The GBP/USD enjoyed some momentum after bypassing the 1.2947 resistance yesterday. The pair failed to hit the 1.3000 handle though before it came under pressure again. The pair’s hourly chart showed it was retesting the upper limits of its week-long channel. Support could come in at 1.2947 and the GBP/USD should stay at this level if it wants to keep advancing.
The GBP/EUR also advanced during Thursday’s early trading. The currency pair rose by 0.31% to 1.1719. There weren’t any fundamentals to support the price change since most European markets were closed for Christmas and Boxing Day.
The sterling appears to be recovering from its shocking post-election drop. The bearish environment was pushed by British Prime Minister Boris Johnson’s declaration to make extending the deadline for Brexit illegal. Investors are understandably worried the truncated timeline could result in a no-deal Brexit and damage the economy.
However, the holidays and an analysis showing that Brexit would not hurt the UK’s position in the world has alleviated some fears. It has also helped the sterling rally and rise 0.13%.
According to the Centre for Economics and Business Research, the UK will continue to have a strong economy and will be ahead of France and Germany. The report also claimed that if present business trends continue, Britain’s GDP will be larger than France by 2034.