Readers of europeanbusinessreview.com will know that times have been hard of late for the stock market. As we come to the end of the year, there is still plenty of uncertainty around. This uncertainty couldn’t be any truer for the foreign exchange market, with the British Pound rapidly changing due to the constantly changing global landscape.
The question is: what does the landscape look like for the British economy and its currency in 2021?
The B Word
Over 4 years later, the uncertainty of Brexit is still one of the biggest strains on the British economy. At this moment exit trade talks are still ongoing with the EU, even as the new year deadline looms. On 22nd December the EU rejected a new proposal from the British government around concessions on fishing that has raised the fears of an impending no-deal scenario.
This news alone has led to the pound going on a bit of a rollercoaster and has found itself dropping quickly against the US dollar. Before this, the pound had shown signs of recovery with a deal around fishing concessions expected.
The latest developments, however, leaves the pound in worse shape than maybe hoped heading into 2021.
A New Strain
The waters have been muddied further by the coronavirus pandemic, with a new strain of the virus forcing a lot of the UK into stricter lockdown measures. With this development, France has put a freight ban on goods from Britain—another pressure point on the pound.
All of this news has dashed hope of any short-term recovery for the British economy, with growth expected to slow and higher borrowing.
A recent Guardian article paints an unfortunate picture.
According to some experts, the picture may not be as bad as the latest batch of news might suggest.
David Madden, market analyst at CMC Markets UK, said, “Fears in relation to the new strain of the coronavirus have faded a little and so have some of the concerns that the UK could suffer a prolonged period of isolation.”
Find more of this quote from David Madden and up to date British economy news here.
Goldman Sachs has stuck with the idea that the pound will make gains, though confidence has wobbled. They said, “[they] think investors should stay long Sterling, with a EUR/GBP target of 0.87 on a deal outcome—though risk-reward looks less attractive at current levels than a week ago.”
Click here to find the quote in full.
If you’ve got this far not knowing your “long” from your “short” then it might be worth having forex trading explained, before going further.
The Future is Unwritten
If the past year has taught the markets anything, it’s that nothing is certain. Until the picture is clearer on Brexit and the new COVID strain, there’s no guarantee how the markets will go long term. It seems though it will make an interesting year for forex trading, with the current volatile nature of the pound meaning a lot of savvy traders could make money and it might be worth looking at trades around the pound.