Pound/dollar: last week's results and forecast for the upcoming period.
The market trend of the week remains, while there are no signals for a strong reversal. The US dollar is fundamentally strong against other world currencies, short positions of market participants on the pound allow the currency pair to stay at the price levels of December last year. If traders sell the pound, then we can expect the exchange rate of the currency pair at 1.3300. At the moment, there is a strong resistance in the area of 1.3430.
The yield of 10-year UK bonds has risen slightly by the end of the week, and now it is at 0.9220%.
Tuesday was influenced by UK retail sales from BRC. The current value showed a decline in trading activity. Meanwhile, retail sales in the EU in September decreased by 0.3% compared to the previous month, when their increase was 1%. Analysts on average predicted an increase of 0.3%.
In the middle of the week, the pound/dollar exchange rate was ready to break through local support at 1.3550. The trading was still influenced by the prospects of the monetary policy of the Bank of England. Representatives of the Bank said that in the coming months they will have to raise the rate from its low level of 0.1% if the economy shows the projected growth.
Macroeconomic indicators accelerated the decline of the pound, they leveled expectations that the Bank of England would soon raise the main interest rates. According to the latest data, the UK economy grew by 0.6% in September, but estimates for previous months were revised downward, resulting in GDP being 0.6% less than in February 2020. This, in turn, greatly weakened the pound, and an attempt to break through the 1.3429 level on speculative purchases was unsuccessful.
And also on this day, data on industrial production and the volume of production in the UK manufacturing industry were published. The September data came out worse than the forecast and worse than the previous publication. This indicates that the kingdom's economy is still far from recovering.
The media talk about systemic problems. The UK is losing its position as a trading partner after Brexit. If the situation does not improve in the second half of the year, then the UK will lose Germany's trading partners. Experts are pessimistic, they do not expect that the situation will change for the better. The president of the British Chamber of Commerce of Germany, Michael Schmidt, even suggested that the situation could only change for the worse.
As for the news of the coming week, the pound will react to the unemployment rate and the UK consumer price index.