The British pound sterling managed to renew its maximum on January 4 at the level of 1.3704 against the US dollar, and has only been declining since then. On Tuesday, January 12, GBPUSD is trading at 1.3540 and may well move to 1.3450 given the risks.
The market is seriously discussing the possibility of introducing negative interest rates by the Bank of England. The next meeting of the regulator will take place only in February, but the closer it is to the meeting, the more nervous the market will become.
The logic is simple: the UK may impose even stricter and tougher measures in the fight against the spread of coronavirus, which will lead to a drawdown in the country’s economy in the first quarter of 2021. This puts pressure on the Bank of England: initially, BoE did not even consider options for negative rates. However, now it is necessary to direct the maximum capital into the economy, and the mechanism of negative rates will work here.
If so, then the pound seems to be in the bearish zone for a long time.
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