On Wednesday, the GBP/USD pair is moving close to another “bottom”; the long-term uncertainty is against the Pound.
The market is a complicated thing, which hates hints and lack of agreement. The entire brexit story is wrapped in mystery, dim future, and a lot of dismal outlooks. The process of the United Kingdom’s exiting from the European Union hasn’t even started yet, but the Pound has already managed to reach several new lows over the last 31 years and fall towards another ones. The current quote for the GBP/USD pair is 1.2936. The latest low reached today was 1.2812.
So, investors are still evaluating and analyzing yesterday’s announcement of the Bank of England, which mentioned al risks of the forthcoming brexit, including capital exports and long-term pressure on the Pound. The Central Bank are already taking steps to soften possible adverse circumstances: it has decreased the requirements to the funds of banks, which may allow the British financial structure to provide more loans than it was expected.
The British interest rate issue is now stepping forward. The indicator hasn’t been reviewed for several years and remained at 0.50% annual. Even before the national referendum, there was talk that the BoE would be unlikely to decide to increase the rate before 2017. Now, one shouldn’t even hint at the rate increase – a vast majority, 80% of those surveyed, believes that the rate will be reduced before New Year. It is needless to say that it’s another reason to sell the Pound.
The Pound can update its “bottom” on an incredibly regular basis, but it’s only market emotions. One should follow very carefully after what the Bank of England does and the Ministry of Finance says. The United Kingdom can afford existence outside the European Union as the country is able to stimulate the economy and attract the capital in other ways. Without the European Union, the United Kingdom will remain the same. It's a different matter that the rest of the EU might suffer losses. And this is what makes capital markets nervous.
RoboForex Analytical Department
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