The Pound while the UK Loosens Restrictions
Looking at the most traded asset during the month of March, we can see the British Pound was the second most traded by our traders in terms of volume. As part of this blog we will look at how the currency has been massively increasing in value due to the devaluation of other major global currencies such as the US Dollar, Euro, and Yen, while the minor currencies such as the Pound, Australian and New Zealand Dollar have flourished. The latest movement for the Pound though has made investors rethink their stance as both the EURGBP, and GBPUSD has seen an increase in volatility against the Pound as the country prepares to loosen economic and social restrictions.
The UK has been wrapped in a nationwide lockdown for many months now, and much longer than their European partners. For this reason, the market has not necessarily been focusing on the lockdown itself to determine their stance in terms of their trade positioning. However, now that we are entering a new phase, traders are evaluating to determine how the Pound is likely to react to the opening of the economy. As of today, we are yet to witness any major positive movement.
Today, the Pound came under pressure from the March data on the UK Services PMI. The indicator entered the growth zone, having increased from 49.5 to 56.3 points, but turned out to be lower than the forecast (56.8 points). Industry officials cite an increase in orders stemming from the relaxation of quarantine restrictions, and two-thirds of service-based businesses said they hoped to grow during the year. Also, the Pound was reduced by comments from representatives of the European Medicines Agency, who recognized the link between vaccinations with AstraZeneca and the formation of blood clots. These claims could slow down vaccination in the UK population, as this is the most commonly used drug for the widespread inoculation.
Starting today in Wales, vaccination begins with a drug from Moderna, which was not previously available in the country. The head of the Ministry of Health in the United Kingdom, Matt Hancock, noted that more than 60% of the population has already received their first dose, and the new drug will help accelerate the pace of vaccinations.
Like most other world currencies, for a long time, the British Pound had practically no reason to strengthen due to the extremely difficult epidemiological situation in the UK. However, from the beginning of March, the situation began to change for the better. Tough restrictive measures, along with a massive vaccination program, began to pay off, and the number of new cases detected began to decline. Wanting to emphasize the positive dynamics yesterday, British Prime Minister, Boris Johnson, said that a large-scale program to lift the current restrictions will begin on April 12th. Pubs, hairdressers, and non-food shops will resume their work. Large-scale indulgences will also affect the sports sector. The ability to sell tickets for stadiums with 25% and 50% occupancy will significantly support a large number of football clubs, for which sporting events are their main source of income.
So, what should we be concentrating our evaluation on as time progresses? This is what traders should be thinking while trading the asset, whether fundamental, technical, sentimental analysis, or even all three. Firstly, it is important to be analysing not only the Pound, but also the counter currency, for example the Euro alongside the EURX, or the US Dollar alongside the USDX. Looking at the next 10 days worth of trading, there are a number of releases which are likely to have a level of influence over the exchange rate. Table below with further information:
|Release||Date||Previous 3 Releases|
|Feb Balance of Trade||13th April 2021||Releases in January and February resulting in the GBP increasing in value but the latest release resulted in a decline.|
|Unemployment Claimant Count||20th April 2021||The latest two releases resulted in the GBP increasing in value. The release in January resulted in the GBP declining temporarily.|
|Inflation Rate||21st April 2021||On the last 3 releases the GBP increased in value.|
As you can see from the above, it is vital to follow the reaction of the currency to the new reality. Most likely as time progresses analysts are likely to expect and predict healthier economic figures such as economic activity, confidence, and growth; it will be important that the actual releases live up to expectation. We hope this blog has given you a clear understanding on the importance of monitoring price movements and developments in order to pre-determine and plan current and future trades.
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.