The pound, which survived the US presidential elections without any losses, is now in an uncertain state. Its flexibility is being hindered by the worsening situation in Europe regarding the second wave of COVID-19 and the long-term Brexit issue.
The key impulse for the pound are the issues related to Britain's exit from the EU. This prolonged process psychologically and economically exhausts both sides, which has an extremely negative effect on the indicated currency. In the short term, much will depend on the course of negotiations between London and Brussels. This situation does not add to the pound's stability, which is struggling to maintain balance.
On Monday, the price of the pound rose by 0.3%, that is, to 1.3229. Its growth was associated with positive news about Brexit. The market expects the UK to sign a trade agreement with the European Union by early next week. Thus, today, the GBP/USD pair is trading near the range of 1.3262-1.3263, overcoming previous levels. The recovery of the country's banking sector and increased business activity is also one of the factors why the pound is increasing. The nearest goal of the GBP/USD pair is the level of 1.3300, which is the upper limit of the trading range and has been a fixed goal over the past two years.
The planning range of the pound dynamics covers the period of the beginning and the middle of 2021. Analysts at UBS Global Wealth Management predict that the GBP will benefit next year from the weakening USD across the market. They also believe that the pound's trading range will remain in the range of 1.3000-1.3700 in 2021. Earlier, the bank's specialists expected the pound to rise to the level of 1.4000.
Moreover, some experts think that the tense economic situation in the country also contributes to the further decline of the pound. The COVID-19 pandemic made a negative contribution to the UK economy, whose consequences were devastating.
UBS Global is confident that the British economy will face difficulties caused by quarantine restrictions due to COVID-19 in the short and medium term. It is possible that the British authorities will have to make adjustments to the structure of the economic recovery and revise the current monetary policy.
Despite the serious pressure exerted on the GBP by COVID-19 and uncertainty with Brexit, the pound does not lose hope for further growth. At the moment, these expectations are justified: it is sharply rising, albeit slow. The main thing for this currency now is to consolidate at the current levels, which can become a catalyst for moving to new peaks.
