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United Kingdom

Forex – What’s the state of the pound?

Britain’s departure from the European Union on January 1, 2021, marks the beginning of a new chapter in the country’s history.

The pound began the year at $1.3625 to the dollar and at €1.1041 to the euro. Since then, it’s been a bumpy ride, facing lockdowns, COVID limitations, growing inflation, and record low loan rates.

Because of an increase in coronavirus infections, England went under its third national lockdown in January, which lasted until the middle of February.

Prime Minister Boris Johnson of the United Kingdom instructed citizens to remain inside and work from home, while non-essential businesses and schools throughout the nation remained shut.

History Of GBP Price Change

After a protracted period of negotiations, the pound initially gained by the UK’s signing of a trade agreement with the EU on Christmas Eve 2020. When it came to the economic background and the epidemic, investors soon forgot about Brexit.

The euphoria around the Pfizer vaccination rollout propelled it to a new three-year high versus the dollar a few weeks later. This was sterling’s highest level since May 2021. By that time, GBP was also trading at €1.1312 to the euro.

The pound had a stronger month in February as it continued to rise and hit a 33-month high, breaking beyond $1.39 for the first time since April of last year. The announcement that the United Kingdom will immunize 15 million individuals in the four highest-risk categories by the 15th of February was heartening. For this reason, the number of investors in the Forex market increased significantly. Those who were new in the marketplace started to seek for the best online broker in order to make their trading experience more sophisticated and implement their strategy more effectively. Later, despite poor UK statistics, the price rose to $1.40 on renewed optimism about vaccine safety and the possibility of loosening lockdown limits.

A third straight week of gains for sterling awaited at $1.4211 versus the US dollar, while it was trading at €1.1630 in comparison to the euro. The dollar was held down by the belief that the United States will continue to boost its economy by loosening its monetary policy and increasing government expenditure.

The second half of 2021 has been a downward ride for the pound, which achieved its highest level of the year on 28 May ($1.4171). Despite this, it has managed to trade in a range of €1.15 to €1.19.

The pound fell to its lowest level in six weeks in mid-June as the Federal Reserve’s decision to raise interest rates fueled a surge in the US dollar, and the UK government prolonged its partial lockdown of England.

In light of the Federal Reserve’s “dot plot” update, the dollar has risen in value, with the first post-pandemic rate hike predicted to occur in 2023.

To put it another way, this pause may be seen as a “Goldilocks” moment for sterling when the shine of a successful immunization program fades and consumer spending recedes as furloughed workers return to work.

In the summer of 2021, supply chain issues, gasoline scarcity, and inflation fears plagued the country.

The governor of the Bank of England (BoE), Andrew Bailey, warned policymakers against overreacting to a rise in inflation that soared over the Bank’s 2 percent objective. However, the pound continued to struggle.

As the fourth quarter of the year drew to a close, wholesale gas prices shot through the roof as a new coronavirus strain surfaced, adding to the mix.

In November, the Bank of England surprised investors by keeping interest rates constant, further devaluing the pound.

After the announcement that Threadneedle Street wanted to monitor how the employment market handled the end of the furlough plan, the pound was trading at $1.343 and €1.166.

Nothing much to say about sterling during the COVID-19 outbreak, Brexit supply concerns, rising energy prices, and an unclear job picture.

In the next weeks, the pound is expected to beat both the euro and the US dollar, but investors hoping for substantial gains versus the dollar may need to rethink their strategy.

With growing inflation and US central bank signals that the stimulus program may be winding down sooner than expected, sterling fell to its lowest level since 2021 versus the dollar ($1.3210). Policymakers had a difficult choice between soaring inflation and a stagnant recovery, but with the present surge caused by global forces, higher interest rates will do nothing to rein in additional increases in prices.

This move to raise interest rates has taken its toll since Omicron’s spread and prospective UK lockdowns took place.

Investors remain negative on the British pound, as seen by recent positioning data showing the highest level of short pounds since October of 2021. And in addition to that as Ukraine- Russian war is about to start many investors remain to be bearish, as the inflation in the UK increases and it losses its value. The government at this rate has no special plan for recovering the national currency. However, if the Russian-Ukraine war stabilizes, this will have a positive effect on the GBP in the FX market.


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