How will the GBP perform in forex markets while being affected by Brexit and the ongoing pandemic?

forex markets

From the perspective of a forex trader, you can’t beat a period of uncertainty and volatility.

Therefore, 2020 into the new year has been the perfect time to speculate and accumulate GBP, a currency that has faced the dual backlash of the Brexit referendum and the coronavirus pandemic simultaneously.

An absolute catastrophe was avoided when Boris Johnson managed to agree on a deal with European Union negotiators – a ‘no deal’ scenario would have sent shockwaves through the market. Even so, the Pound Sterling has fallen from 1.20 against the Euro in February 2020 to 1.12 less than a year later.

So, is this an appropriate time to start trading with or against GBP? As long as you choose the most effective forex account management services, it goes without saying that there’s money to be made trading Pound Sterling right now.

An uncertain future

On the day of writing (January the 19th), the UK had the highest daily death rate from COVID-19 than any other country on the planet.

With the government insinuating that a full national lockdown is likely until February at the earliest, the damage to the British economy will continue for the foreseeable future.

Naturally, that will have implications for GBP, especially when you compare the currency to that of AUD, CAD and the like, which are being buoyed by the fact that their respective countries are beginning to get a hold of the pandemic.

But things are moving in the right direction for the UK now, with a seemingly robust vaccination programme allied to further financial support from the government to those unable to work. Should some restrictions be lifted in time for the spring, a jolt to the economy seems a certainty.

Beyond that, there are still known unknowns. What kind of trade deals will the UK seek after divorcing from the EU? Turkey is on board as one such trade partner, while the UK’s close ties with the US and parts of Asia will be retained. But will that act as the necessary stimulus to create trust in the British economy once more?

European strife

The nature of the European Union, and the disparate countries that make up its membership, mean that there’s a considerable difference in how each is faring in the wake of the pandemic.

The irony, with financial stimulus within the EU being slow in moving forward, is that the Euro is struggling post-Brexit, with many pundits expecting GBP to recover at a quicker rate than EUR.

If that is the case, savvy traders may close any EUR positions they have in favour of the GBP – that in turn will help to build trust in the Pound and swerve traders towards investing in the currency.

American (cov)idiot

Donald Trump is all set to leave the White House and his successor, Joe Biden, is expected to oversee improvements in the US economy. They will be linked to growing inflation and a more settled political stance with China and other nations that have become something of an enemy to America in recent times.

That said, the implications of the coronavirus pandemic on a country with 328 million inhabitants are stark, and it could take a long time before the American economy reaches anything like its pre-COVID levels.

With travel restrictions remaining in place, tourism will remain thin on the ground for much of the year, so reliant states like Florida and New York will be bereft of their usual steady flow of income.

That will naturally pull the GBP/USD forex pair downwards, and so perhaps seeking out currency pairs that look set to enjoy a swifter recovery – maybe GBP/AUD or GBP/CHF – is the smart move right now.

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