The pound against the dollar is showing stability, having been in an uptrend for a long time, but many analysts point to increased risks that the Bank of England may introduce negative interest rates in the near future. Even if it is short-term, the pound will still suffer serious losses.
How big is the risk that the Bank of England will introduce negative rates and is it time to sell GBPUSD? Andrey Maslov, an analyst of the FINAM Group, answered the question of Fortrader magazine.
– The probability that the Bank of England at the next meetings will reduce the key rate below zero, really exists.
The Central Bank has been studying the possible effects of the application of this measure for quite a long time and, given the difficult economic situation in the country, it may take this step. Obviously, such a decision may entail weakening of the British currencywhich, in turn, would improve the performance of UK foreign trade. However, in the context of ultra-soft monetary policy pursued by other leading central banks, we do not expect a significant drop in the pound rate.
However, there are other significant political risks for the pound sterling. Thus, economic communication with the EU has not yet been established, especially regarding the financial sphere. Many commodities are traded through Ireland and the City of London still has limited access to markets across the continent.
You should also bear in mind the risks associated with the possible holding of a referendum on the independence of Scotland. According to the latest polls, 58% of Scots are ready to support the withdrawal from the United Kingdom, which is a record level.