The upward trend continues. On the chart we can see a good potential for growth, but when betting on the pound, you should understand all the risks. What will happen in the future with the pound will be known soon: investors expect the completion of negotiations on a trade deal with the EU. They are optimistic. As a last resort, we can expect a certain compromise agreement with a long transition period, which may be temporary, but there will not be a complete postponement of the issue, as before. The talks are likely to be completed by December 10, although some sources say they are on the verge of collapse. Skeptics say that if four years weren't enough for the UK to conclude a trade deal with the EU, it is unlikely that the situation will change in a few days. On the other hand, no-deal trade is extremely unprofitable for Britain, and they can make last-minute concessions on the remaining unresolved issues.
Despite the Brexit uncertainty, the pound continued rising this week. The pound also receives additional support in the confrontation with the yen amid the general optimism in the market, as well as news that the United Kingdom will be the first to start vaccinations against the coronavirus, which theoretically should allow it to cope with the pandemic earlier than others and avoid further lockdowns.
Demand for safe assets is declining. Despite certain successes of the JPY against the USD, the yen cannot show similar results in the confrontation with risky assets. Macroeconomic reports on the Japanese economy show zero inflation processes within the country and an increase in unemployment by 0.1%. Industrial output is up for the fifth month in a row, but this is not enough to strengthen the yen. Published this week, reports on business activity in China show growth above the forecasts and encourage investors to give preference to risky assets, for example, the pound.
Most technical analysis tools indicate the continuation of the uptrend. We, in turn, also believe that the deals to BUY will be more promising in the short term. At the same time, trading with the pound, we remain extremely careful and cautious: volatility may increase sharply due to the likely completion of negotiations on a trade deal with the EU and unpredictable results.
