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THE POUND ROSE TO ITS HIGHEST LEVEL IN ALMOST 7 MONTHS. WHAT'S NEXT?

On Wednesday, the GBP/USD crossed the 1.3000 level and set a new high in almost 7 months. The main driver of price growth was the numerous polls, which predict the victory of the Conservative Party in the parliamentary elections.

The gap between Boris Johnson's party and the Labor Party in various polls ranges from 10 % to 17 %. The conservative victory increases the chance of Britain's exit from the EU as early as the beginning of 2020.

Earlier, Boris Johnson stated that all candidates from the Conservative Party have pledged to support his draft agreement with the EU. Additional support for the Conservatives will be provided by the supporters of Brexit. Earlier, the party's leader said that his supporters would not contest the seats claimed by the Conservative Party representatives in the elections. Also, members of the Brexit Party will support the project of Boris Johnson on the UK's withdrawal from the EU.

Now the market considers the victory of the conservatives as the most favorable scenario for both the British economy and the pound sterling. The victory of the conservatives will allow Boris Johnson to carry out the Brexit agreement through the parliament and start the next stage of negotiations to form a trade agreement with the European Union.

If the conservatives do not get the majority of votes, the parliament may again be in a "hanging state", as Labour will block any attempts by Johnson to get the Brexit agreement through parliament. To avoid uncontrolled UK withdrawal from the EU, Brexit will have to be rescheduled again. Overall economic and political uncertainty will increase pressure on the economy and the British currency. The country is likely to hold new parliamentary elections.

Overall, the situation remains rather uncertain, as the Conservative Party's current leadership does not guarantee that it will win the majority of parliamentary seats. The domestic growth of the GBP/USD pair to 7-month highs is likely to be purely speculative. Many investors will use the current growth in quotations to fix long positions in the British currency. Referendum on Brexit and elections of the president of the USA have already shown, that numerous sociological surveys may not reflect the real position of voters.

There is still a lot of uncertainty on the GBP/USD chart, despite the local growth. On the one hand, the breakthrough of the 1.3000 resistance opens good prospects for further growth of quotations in the region of 1.3200. On the other hand, there is still a high probability of forming a reversal signal "false breakthrough", the development of which will be a decrease in quotations in the region of 1.2830. The nearest days will be decisive. If bulls cannot hold the price above 1.3000, we should expect the realization of the second scenario.

ICE Markets Review

Friday, 06 Dec, 2019 / 9:35

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Source : https://ice-fx.com/en

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