After analyzing the potentials of the pound in the context of overcoming the negative consequences of coronavirus infection, many experts are inclined to a positive outcome. However, an obstacle to growth may be a return to the chaotic Brexit. As a result, the pound will have to deal with two powerful destructive factors. Experts wonder whether the pound will manage to win.
At present, the pound, just like the euro, has to devote all its efforts to patching holes in the economy, provoked by the tumultuous impact of COVID-19. In addition, the ghost of a chaotic Brexit arose in the British economy, which recently existed on the sidelines, and now has shown itself again. Assessing the risks of UK exit from the EU without a deal, experts from a number of large banks, such as Nomura and Rabobank, draw attention to the high likelihood of such a scenario. However, experts rely on the sterling's stability to negative external and internal factors, although they allow its subsidence to 1.2000.
At the end of last week, the pound showed a corrective movement, which experts considered a harbinger of growth. On Friday, April 17, the GBP / USD pair reached a psychologically significant mark of 1.2500, but could not stay at this level for a long time. On Monday, April 20, the pair was moving in the range of 1.2481–1.2483, trying to return to the previously conquered peaks.
Currently, the pound is relatively calm. Experts do not record excessive distortions either in the direction of decline or in the direction of growth. However, analysts do not exclude the pair's reversal to a downward trend. The catalyst for such a recession could be due to the negative macro statistics on the economy of the United Kingdom. On Tuesday, April 21, important information will be released on the number of applications for unemployment benefits in the country and experts allow the collapse of this indicator to critical values. According to a recent forecast in March, the number of applications can not only reach 272-300 thousand, but also exceed this level. As a result, the UK will be in the same position as the United States, whose economies have been hit by a shocking unemployment rate.
On Thursday, April 23, the UK economy will replenish with regular indicators that will affect the dynamics of the pound. Experts include April business activity indexes in the manufacturing sector and the service sector. They fear a fall in the level of business activity in production to 40.8–41.5 points from the current 47.8 points. On the following day, the publication of retail sales in the UK over the past month is expected. According to preliminary forecasts, this indicator will drop by 4.5% on an annual basis, and by 4.2% on a monthly basis, which will add negative to the pound.
According to analysts, overcoming the devastating consequences of the COVID crisis and the possibility of mitigating the Brexit remains a major problem for the pound. The further GBP dynamics vector will depend on how effectively both problems can be resolved. If the sterling escapes with the least losses and emerges victorious from this struggle, the current year will become relatively calm for it. Experts rely on a similar scenario, believing that the pound's recovery ability will be at its best.
