The pound, together with other major currencies, took a wait-and-see attitude while it awaited the US presidential election results. Experts believe that the pound's reaction to this event will be unusual, which will unfold in the near future.
Based on the estimates of ING analysts, the British currency is seriously lagging behind most other currencies that are economically sensitive to the US currency. This scenario is possible if Joe Biden, the candidate of the US Democratic party, wins the election. ING believes that a democratic preponderance is the most favorable result for the market, since in this case, fiscal incentives are likely to rise and international relations will stabilize.
In case that Joe Biden "reigns" in the medium term, we can assume that stock indexes will rise and a large-scale package of economic financing measures will be adopted. However, in the long term, the leading stock indexes are likely to decline due to increased taxes. It should be recalled that growth in the tax burden, for example, the increase in corporate tax from the current 21% to 28%, is included in the election program of the Democrat.
Against this background, the dynamics of the pound is affected negatively by a tense external stop. This currency's volatility is increasing, and plummets from time to time in order to rise on the next round of growth. Yesterday, the GBP/USD pair increased from 0.6% to 1.2992. Today, the pair slightly lost ground. It moved around the range of 1.2987-1.2988 in the morning, gradually rising to reach new highs.
Experts believe that the strengthening of internal risks associated with the current monetary policy is also another factor that puts pressure on the pound. Tomorrow, the Bank of England plans to hold its next meeting, where a decision regarding increasing the quantitative easing program is expected.
For the third factor, analysts consider the continuous issues related to Brexit, which threatens the growth of the pound. According to spokesman Boris Johnson, Prime Minister of Great Britain, the United Kingdom is ready to negotiate with the European Union to conclude a mutually beneficial trade deal. This is very favorable for the British currency, since the reduction of geopolitical tensions contributes to the purchase of the pound. However, a new political crisis hangs over the UK. This is related to the dissatisfaction of some politicians with the actions of Mr. B. Johnson to contain the spread of COVID-19. Against this background, major market players slightly increased sales of GBP, which led to a reduction in its dynamics.
Now, experts say that the pound may surprise the market after the US presidential elections. Although it is expected to significantly decline, another scenario is possible that can surely be surprising. Here, it is likely that the pound will break through the current negative trends and manage to increase to the next highs.
The material has been provided by InstaForex Company - www.instaforex.com