The latest data shows that the British pound is going through difficult times. This week, the pound posted its biggest weekly losses against the US dollar. The reason for this could be the overall strengthening of the US dollar as well as the threat of Brexit without a trade deal with the EU.
On Friday, the pound managed to win back some of its losses against the euro. However, the sterling remains largely unchanged against the US dollar and continues to hold near the previous low. The downtrend is mostly related to the Brexit issue as no significant results have been achieved in this regard. This serves as a bearish factor for the pound. Moreover, the situation is expected to become worse by the end of the year, thus pushing the UK currency even lower.
On the other hand, the US currency is gaining momentum to open next week with a rally. Moreover, it could lead the dollar to the highs not seen for the past four months. It is expected that the upside movement will come against the collapse of stock indicators that occurred yesterday. Market participants are gradually moving away from risk assets and return to the safe haven.
It seems that the pound's rally is coming to an end. At the beginning of this week, the sterling surged to record highs in the last eight months amid the weakening US dollar. On Tuesday, the pound rose to 1.3481 against the greenback. However, a few days later the pair collapsed to as low as $1.3244 per pound. The uncertainty around Brexit could have caused such a rapid fall. Besides, the Bank of England indicated that the consequences of the coronavirus pandemic could be much worse than previously expected.
This morning, the GBP/USD pair was holding near 1.3289, 0.1% up from the previous close.
This week, several majors, including the British pound, the euro, and the NZ dollar, were losing ground against the US dollar. However, the pound was the worst-performing currency this week.
Meanwhile, analysts see no opportunity for the pound to recoup its losses. Most likely, the bearish pressure will prevail, while and the news background may deteriorate further. This means that the pound will finally stop its uptrend to the psychologically important level of 1.35 against the US dollar.
This morning, the cable gained 0.2% against the euro, reaching the level of 89.1. However, this result is not so impressive as it was the smallest gain posted this week.
The outlook for the pound by the year-end is not encouraging either. Experts believe that in late autumn the British currency may drop to $1.3 per pound. Under a worst-case scenario, the pound may plunge to $1.2 in the next twelve months. If the situation is not as bad as expected, the pound may rise to $1.47. However, such long-term forecasts are usually not confirmed and are always subject to revision.
