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GBP/USD: Will the Bank of England see a pound?
The course of the British currency against the US dollar has fallen to a minimum since the beginning of 2017 against the background of the preparation of the UK government for the unorganized withdrawal of the country from the EU.
Apparently, London is ready to act tough and mercilessly. Most likely, such a scenario will become a reality – after all, B. Johnson was the one who “sharpened” his office.
It should be noted that the newly appointed prime minister was able to carry out the most large-scale change of government in the modern history of Great Britain without transferring power from one party to another, appointing his people to key posts.
In addition, B. Johnson formed a group of ministers charged with the task of conducting Brexit by any possible means and which was already called the “military office”.
Meanwhile, the EU does not intend to resume negotiations with Foggy Albion under the terms of Brexit, however, according to experts, with the arrival of B. Johnson, the former paradigm, calculated on the “compromise” position of Theresa May, collapsed. Now, Brussels will have to reckon with the new alignment of forces, and it seems that the alliance will have to find a way out of the impasse. As for B. Johnson and his team, they are ready to build new relations with the EU.
“We can make a new deal, but we have to prepare for a” tough “Brexit, if this cannot be done without. We just want to say that “backstop” is a bad idea. It is no longer relevant and should be abandoned, just like the current agreement on leaving the UK from the EU, but we are able to make a new deal, “the British Prime Minister said .
“We want to improve the agreements with our partners in the EU, but for this, we need to cancel the undemocratic backstop,” said United Kingdom Foreign Secretary Dominic Raab.
He also said that, if necessary, the country should be ready to conduct operations based on the current tariffs of the World Trade Organization (WTO) before concluding free trade deals with other states.
“The recent comments of D. Raab and B. Johnson were hardly encouraging investors. The GBP / USD pair broke long-term support at a low of 1.24 last week, and the last real support – at least 2016 – is at the level of 1.1840, “said Sean Osborne of Scotiabank.
The British currency has undergone a serious sale of growing fears about Brexit without a deal, but the problems of the pound do not end there.
It is expected that this Thursday the Bank of England may signal that it is unlikely to raise the interest rate in the coming months, which may put additional pressure on the British currency.
Derivatives market lays in quotes more than 60% probability that the British Central Bank. It will reduce the interest rate by 25 basis points by December due to the fact that the country can leave the EU without an agreement. For comparison: in June, the chances of such a reduction were estimated at only 20%, since the regulator ignored global trends and indicated the need for a rate increase in the coming years.
“With Boris Johnson, who has now become Prime Minister of Great Britain, the Brexit saga should resume. The shift of the Bank of England towards a neutral position – almost giving up hopes for further normalization – will leave little as support for the British currency, ” said JPMorgan strategists.
The material has been provided by InstaForex Company – www.instaforex.com
