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Britain's New Stance


21 September 2020


For the first time in 30 months we are witnessing a weak Dollar, which would normally be positive for the British Pound that has traditionally aimed for a strong currency due to its high amounts of imports vs exports. This has been the case over the last 6 months, but the Pound has struggled lately retreating from price highs. This article will look at the different elements which are having a negative impact on the British Pound.

The British Pound, over the last 24 hours, has strengthened amid the macroeconomic data released today from the UK. Average earnings including Bonus in July increased, claimant Count Change fell in August to 73.7K, and the Unemployment Rate for July remained at the expected level of 4.1%.

At the same time, youth unemployment has also caught some traders’ eyes. The unemployment rate grew to 4.1% in July, compared with 3.9% previously. Young people were particularly hard hit, with those aged 16 to 24 suffering the biggest drop in employment compared with other age groups. 4.1% is not necessarily considered heavily high but at the same time if the figure continues to increase it will damage overall sentiment. 

Chancellor Rishi Sunak said “helping people get back into, or finding new work” was his “number one priority”. But in a briefing to the Cabinet on the economy, he reaffirmed a decision not to extend the government’s Job Retention Scheme which ends on 31st October. How badly will this affect the youth unemployment rate?

Brexit and the New Bill 


However, even with the largest uptrend price movement, the GBP continues to remain under the pressure of sharply increased risks associated with the hard Brexit. One of the things which currency traders fear is uncertainty, and the markets are still trying to figure out what Boris Johnson is trying to achieve, having stepped up criticism of the EU recently. 

Last week the British government passed a bill that could allow the UK to actually violate international law on the issue of trade with Northern Ireland and passed a new similar bill yesterday. It’s possible that these are only political machinations, designed to bargain with the EU for the best deal terms, but so far Johnson’s position looks quite plausible.

The move by the British Prime minister has received a lot of criticism from parliament and previous Prime Ministers because it seeks to overrule parts of the Brexit deal between the UK and the EU that came into effect in January. 

COVID-19 in Britain 


The Virus in the UK and around the world has slightly taken a back seat as most traders believe the government will refrain from a further lockdown. However, rising cases do not necessarily support the sentiment and if the government does impose restrictions as the UK has, it may put further strain on the UK’s GDP, inflation and the currency.

In the last month the number of cases in the UK has increased from well under 1000 per day to over 3500 cases per day. Since then the UK government has put in further restrictions but refrained from commenting on possible lockdowns.

The Price Movement 


When  looking at the 4 hour chart the Pound has started to slightly recover from the large bearish trend in early September. The pair has managed to achieve a slight higher higher and higher low amongst the swings, however, it is very slight and with not much momentum.

Price movement is likely to increase on Wednesday afternoon as the US releases its economic projections and Federal Interest Rates. Therefore, traders should be aware that these announcements may completely change the trend and volatility. 

 

This article was written and submitted by eXcentral. 

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.81% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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