The British currency continues to be in a state of price swing. In the wake of positive news, such as Nigel Faraj's refusal to fight for seats in the British Parliament, the pound sharply rose, and then began to fall no less rapidly. According to analysts, the sterling's hopes for growth were in vain.
At the very beginning of this week, the pound felt excellent, strengthening its position amid the growth of the British economy and after the news about the general election. These factors have significantly increased the likelihood of a Brexit deal at the end of this year, analysts said. The statements of Brexit Party leader Nigel Faraj provided powerful support to the sterling. Recall, he refused to fight for seats in the British Parliament, which is claimed by the Conservative Party. Analysts believe that the refusal of Faraj will allow the Conservative Party to receive a majority of votes. According to the party leader on Brexit issues, his candidates will only claim the places for which the Labour Party and the party opposing the country's exit from the EU are fighting for.
The good news for the pound was also strong data on the growth of the British economy. UK GDP increased by 0.3% in the third quarter of 2019 compared to the previous quarter, and in annual terms, the growth was 1.2%. This was facilitated not only by high consumer spending, but also by active foreign trade. The economic growth in the country was not prevented even by uncertainty about Brexit and a slowdown in the global economy, analysts said.
However, the positive news for the sterling ended there. The sharply rising pound began a downward movement on Tuesday, November 12. Some currency strategists, analyzing the situation with Faraj's refusal, came to the conclusion that this move in the political game can checkmate the pound and the British economy. Of course, now Prime Minister Boris Johnson can claim the majority of votes in Parliament, but it is not known whether he will be able to get the right amount. Recall that if the prime minister wins, the UK can leave the EU without a deal, and this will not benefit the pound or the country's economy.
The British currency, which soared by almost 1% to the level of 1.2898 after Faraj's refusal, began to fall. Analysts consider this the most powerful jerk of the pound since the middle of last month. The sterling experienced serious volatility yesterday, dropping to the support level of 1.2830 at some point.
By Tuesday evening, the British currency had leveled off a bit. The GBP/USD pair began to trade in the range of 1.2844-1.2845. The pound eventually tried to win back the lost positions, but it only managed to succeed the next day, and it was not to the full extent.
The GBP/USD pair began with a positive on Wednesday morning, November 13, finding itself at around 1.2858. However, the pound could not hold it for a long time.
Subsequently, the pair fell to the level of 1.2854–1.2855, but could not resist it either. Analysts have recorded a rapid subsidence of the GBP/USD pair and an increase in the downward trend.
The downward movement intensified, confirming the worst forecasts of analysts. At the moment, the pair reached a critical rate of 1.2833.
The pound, which weakened after the peak of euphoria caused by Faraj's statements, continued to slide into attempts to find the bottom. Fuel was added to the fire yesterday by the publication of weak data on the UK labor market. Disappointing statistics returned the British currency to the support level of 1.2828–1.2830, which buyers of the pound tried to keep in vain.
At the moment, the GBP/USD pair runs at extremely low levels of 1.2827–1.2828, having lost the entire safety margin accumulated earlier.
Analysts were seriously worried about the pound's pullback to the level of 1.2827 and lower, which may lead to a further fall of the GBP/USD pair and a return to the support level of 1.2799. They remind that there will be a storm for the pound in the future. The sterling will experience serious volatility on Brexit election news and further voting.
The pound turned out to be a litmus test, sensitively responding to all the vicissitudes of the difficult path of Britain's exit from the European Union. The pound has always followed political events, and this time his vector is directed towards the upcoming elections. The dynamics of the British currency will depend on their results, which determine the future fate of Brexit.
The material has been provided by InstaForex Company - www.instaforex.com