An unusual decision was made by the Bank of England yesterday. Everything went as expected, and the British regulator has actually expanded the quantitative easing program. Analyzing the official message of the Bank of England, it says about the extension of the emergency program to support the economy for six months, which is a program introduced due to the coronavirus pandemic. In general, this is exactly what the European Central Bank and the Federal Reserve System did earlier, who also expanded and extended similar programs. But, unlike them, there is not a single indication of any volumes in the official document of the Bank of England. The solution is indeed somewhat strange. Surprised market participants did not even know what to do, so the pound was extremely reluctant in declining.
However, a serious reaction was not expected in any case, since the fate of the trade agreement between London and Brussels is currently much more important for the pound and it was this very issue that eventually led to at least some noticeable weakening of the pound. The negotiation process was stopped again after several days of relentless bickering for a breakthrough and intense negotiations to reach an agreement on many issues. Boris Johnson has bluntly stated that Brussels should somewhat reduce its excessive fishing requirements; otherwise, negotiations will not go on. Nevertheless, this still did not lead to a collapse of the pound sterling, since the negotiations remain, albeit informal. Moreover, both sides express their hopefulness to find some kind of compromise on the remaining issues on Sunday and still make some kind of agreement. After all, London and Brussels have almost no time left.
It is clear that the pound's fate depends on this alone. If there is no trade agreement, then this could literally shock the British economy within two weeks. Thus, today's retail sales data, which should show a slowdown in growth rates from 5.8% to 3.2%, will not have any impact. In fact, the market will most likely ignore them. Investors will be waiting for more news on the progress of negotiations on the trade agreement and any news will possibly be released at the weekend.
Retail Sales (UK):
The pound/dollar pair updated the local high of the medium-term upward trend yesterday. As a result, this affected the area of interaction of trade forces at 1.3550/1.3650, where the quote immediately lowered the volume of long positions and entered the stagnation-pullback stage.
In terms of market dynamics, the daily volatility indicator is still above the 100th mark, which indicates a high speculative interest in the market.
If we proceed from the quotes' current location, then the same pullback from the interaction area of trade forces can be seen.
Considering the trading chart in general terms, it can be seen that the quote in the daily time frame is at the high of the medium-term upward trend.
It can be assumed that market participants will try to maintain the pullback stage in the direction of 1.3450, where another stagnation is likely. As before, the main incentive for action is still the information flow associated with Brexit.
From the point of view of a complex indicator analysis, it can be seen that technical instruments on the hourly and daily time frames signal a buy, as the price is located at the high of the medium-term upward trend. The minute time frames, in turn, moved at the pullback stage with a sell signal.
