The pound is doing its best to leave the "red" zone, in which it found itself due to economic problems in the country. This currency's current decline is due to a number of factors that significantly slow down its potential growth.
Last night, the British currency fell 1.15%, slipping to a low of 1.3540. Analysts consider this value to be the lowest in the last eight months. On the morning of Wednesday, the GBP/USD pair was trading at the level of 1.3550, trying to get out of the downward spiral, but with varying success.
The huge difficulties in supply chains recorded in the UK have a negative impact on the dynamics of the pound. Many analysts are confident that their impact on the GBP is much stronger than the Bank of England's "hawkish" comments last week. The likelihood of a sharp reduction in the fiscal stimulus of the British economy, the negative consequences of the country's exit from the EU, and the curtailment of the current job preservation program also added pressure.
Many economists doubt that the regulator will normalize the monetary policy in the near future. At the same time, the UK economy is under pressure with regard to gas supplies. It should be noted that the problem of the shortage of blue fuel has covered almost all of Europe. Experts fear that the eurozone will face a massive LNG shortage this winter, which will hit the region's economy hard. In addition to gas problems, the UK faced a labor shortage and logistics difficulties. "Increased costs and declining competitiveness in the UK contribute to the depreciation of the pound in the long term," experts at HSBC Bank emphasize.
Deutsche Bank's currency strategists maintain a "bearish" attitude towards the pound, recommending selling it against the Norwegian krona and the Swiss franc. According to experts, the external background is extremely unfavorable for the British currency. Deutsche Bank believes that the country will face "one of the sharpest fiscal cuts in the G-10" in the near future. Additional pressure factors are the current problems associated with Brexit and the completion of the employment support program, which negatively affect the further growth of the economy.
The downward movement of the pound is complicated by technical factors that contribute to the dominance of sellers. During this week, the GBP/USD pair plummetted below the significant support level of 1.3700, moving into the range of 1.3500-1.3600. In the current situation, there is a potential for a large-scale correction of the pound around the 1.3440 mark, which opens the way to a decline to 1.3000.
Experts do not see prospects for the pound in the long term, but some improvements are possible in the short term. Against the background of the curtailment of quantitative easing (QE) programs by the Bank of England, the pound can make short-term growth. According to analysts at HSBC bank, the pound is given a head start by maintaining the key rate at the current level and the early termination of the QE program. At the same time, the cautious optimism of the experts leaves room for maneuver needed by it.
