The growth of the pound sterling is quite concerning, since it is not only groundless, but also simply irrational. Moreover, the current situation is very absurd. After all, the main impulse behind the pound’s growth are reports of plans to lift various restrictive measures soon, which was imposed by the UK government due to the COVID-19 pandemic. The world media is talking about this. However, it should be noted that the declining cases of infection and the ongoing vaccination are not only taking place in the UK. The same is happening in continental Europe, and in North America, and in other parts of the world. Therefore, it is clear that the other countries have similar processes, not just in the United Kingdom.
However, a lot of media outlets greatly put more importance on the events in London, as if the world has returned to the Victorian era, when the sun had not yet set over the British Empire and Buckingham Palace was the center of the universe. Unfortunately, this very empire no longer exists for almost a hundred years. There is no doubt that the UK is still a significant country, which is one of the ten largest economies in the world. Although, Indonesia and Brazil have larger economies. In Europe, the UK is generally the fourth economy, behind countries such as France, Russia and Germany. On the other hand, there is nothing to compare with China and the United States. In many of these countries, the epidemiological situation is much better than in the United Kingdom – vaccination is gradually going on around the world, and restrictions, which are often much milder, will clearly be lifted.
The issue is just that the market and the media behave as if there is only the metropolis of the empire. In general, the thinking of the era of colonialism. However, the world has changed a long time ago. So, when speculators come to their senses, there is a risk that the pound will decline again just like in 2016. Can you recall the reaction of the market during the results of the Brexit referendum? If not, you will soon be reminded of them.
At the same time, the economic situation in the UK is very unimportant. The unemployment rate continues to rise, which has already surged to 5.1%. In turn, employment declined by 114 thousand. The worst thing is that the growth rate of average wages accelerated from 3.6% to 4.1%. A rise in wages, with a simultaneous unemployment growth, means only one thing – the lowest-paid workers lose their jobs, while the highest-paid managers keep theirs. In other words, companies are cutting their costs by laying off the least paid workers, of whom are always the majority. It is this very majority that forms the bulk of the aggregate demand for goods and services. Therefore, if they lose their jobs, then consumer demand will decline, accompanied by companies’ profits, which will continue to cut their costs by reducing staff, while the highest paid specialists will keep their jobs. In general, a kind of vicious circle. At the same time, such a situation provokes the growth of stratification in society, which leads to an increase in social tension. Looking at the labor market, it is better to stay away from the pound.
Unemployment rate (UK):
The GBP/USD pair managed to break through the psychological level 1.4000 (1.3950/1.4000/1.4050), which resulted in the emergence of speculative manipulations in the market. Due to this, there was an update of the high of the medium-term trend.
The dynamics in the market tends to rise, which is confirmed by the speculative behavior of market participants, as well as the quote’s inertial movement.
Based on the quote’s current position, speculative price growth was observed during the Asian session, which led to an upward movement of 100 points.
Considering the general trading chart, the daily period, a rapid upward trend can be noticed. The quote moves at the peak of it.
We can assume that long positions were locally overheated due to the sharp activity during the Asian session, which could lead to a technical pullback or stagnation. At the same time, the speculative hype remains in the market, and traders are still inclined upwards. The subsequent upward move, which will lead us to the peak of 2018, will occur after the current high of 1.4224 is updated.
From the viewpoint of comprehensive indicator analysis, it shows that the indicators of technical instruments on the hourly and daily charts signal a buy, due to the quote’s movement at the high of the trend. In turn, minute charts signal a sell due to a technical pullback.
The material has been provided by InstaForex Company – www.instaforex.com
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