The British pound is making its way to another one-year high after a small downward correction that was observed earlier this week. Good fundamentals on GDP growth and inflation leave buyers of the British pound in the market, who are counting on the further recovery of the pair as the quarantine measures are lifted in the UK.
Most recently, we talked about the UK budget, which will be presented by Finance Minister Sunak in March this year. It focused on the extension of business and employee assistance programs, of which the UK government takes on a fairly large cost of ensuring payments. We will not talk about specific figures, as we will talk about something else below. No one doubts that the adoption of the new budget will require serious reforms, including tax increases and spending cuts. It is another matter whether there will be room to extend the full scope of the aid programs that leave the UK labor market at current levels. Without these programs, everything was different, and the number of unemployed was higher by hundreds of thousands.
Now is the time to talk about a recent report from the Resolution Foundation, which boldly estimates that about 2.6 million people in the UK, or 8% of the total workforce expect to lose their jobs in the next three months. This figure is not taken out of the head but includes already those people who were informed that they would be fired. Young professionals, as well as people working in low-paid jobs, are most at risk. According to the data, about 2 million people would have received the status of unemployed or would have been sent on unpaid leave in the last half of the year, if not for the current labor market support programs in the UK. A survey by the British Chambers of Commerce found that a quarter of the 1,100 businesses surveyed plan to cut jobs if government support programs end as planned in March this year. The research shows that the economy and most jobs will recover quickly after the restrictions are lifted, as the rapid vaccination program will allow shops, restaurants, and bars to open by the summer of this year. However, until this point, the support program action is required. The instability of the labor market can become a serious obstacle to the recovery of the economy as the restrictive measures are lifted. According to the latest forecast of the central bank, unemployment is expected to rise from 5% to 7.8% in the 3rd quarter of this year.
Let me remind you that just recently, the UK Labor Party announced the need to extend state assistance programs in the fight against the coronavirus pandemic, which will end in March this year. If this does not happen, the economy could lose up to 50 billion pounds. The argument was that many firms were running out of cash, and therefore needed to provide additional liquidity. The party has already called on British Finance Minister Rishi Sunak to act now, rather than wait until March 3, when a budget approval meeting will be held, at which benefits and various programs to support business and the labor market are expected to be extended. Labor expects that after the expiration of the support programs, English businesses will immediately face additional costs of about 50 billion pounds, which will blow a hole in the economy. Representatives of the Labor Party also reminded the finance minister about the value-added tax, which is about 34 billion pounds. After the cancellation of benefits, it must be paid by March 31, 2021, which only increases the debt burden on enterprises and companies.
As for the technical picture of the GBPUSD pair, a break in the resistance of 1.3950 will certainly lead to a new wave of growth of the trading instrument already in the area of the highs of the 34th figure, which will open a direct road to 1.4040 and 1.4120. It is not necessary to talk about a downward correction in such a bull market when buyers managed to fulfill all the tasks they took on. The nearest support is the area of 1.3900, just below which the level of 1.3840 passes.
