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Under the new political situation, will the pound rise or fall in the future?

2024-07-10

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Amid the volatility of global financial markets, the British pound has become the focus of professional traders with its unique robustness. With the new political situation in the UK and France, the performance of the pound is particularly eye-catching. This article will deeply analyze the market performance of the pound in the current political and economic context, explore the factors behind it, and look forward to its future trends.

The overwhelming victory of the British Labour Party in the general election has injected a shot in the arm for the pound. The new government has promised to end the political turmoil of the past five years and bring stability to the country. This expectation of political stability has become one of the important factors for the recent strong performance of the pound. Political stability is regarded as the cornerstone of the value of a currency, and the coming to power of the new British government has undoubtedly provided this cornerstone for the pound.

Economic data: strong support for the pound

The Bank of England kept interest rates at a higher-than-expected level at the beginning of the year, a decision that reflects the high inflation of wages and services in the UK. The strong performance of economic data provides solid support for the pound. The robustness of the British economy is a direct reflection of its currency value and an important factor in attracting investors.

Against the backdrop of increasing global economic uncertainty, signs of slowing US economic growth have put pressure on the US dollar, indirectly supporting the pound. As one of the world's major reserve currencies, the fluctuations of the US dollar have a direct impact on other currencies. In such a market environment, the pound has shown its appeal as a safe haven.

From a technical analysis perspective, GBP/USD has shown a stumbling pace at the 200-week moving average, and this technical resistance level has become the focus of market attention. Technical analysts are closely watching this level as it may mark a turning point for the pound in the short term.

Jane Foley, head of foreign exchange strategy at Rabobank, represents the market's expectations for British political stability. She believes that British politics can avoid the drama and uncertainty of the past, and the pound is expected to continue to recover slowly. This view reflects the market's consensus on the positive impact that political stability in the UK may bring.

Although the pound has performed steadily in the short term, the market still needs to be vigilant about potential risk factors. The speech of Peel, chief economist of the Bank of England, may be more consistent with the consensus of the central bank, which may have an impact on the pound. At the same time, the market's expectation for an interest rate cut in August is 59%, and this change in expectation may affect the trend of the pound.

The position changes of IMM traders show that the influence of carry trade in the foreign exchange market is increasing. The long positions of GBP and NZD reflect the market's need for risk diversification, and also show that the interest rates in the UK and New Zealand are close to those in the US, providing opportunities for carry trades.

Future Outlook for GBP

The future trend of GBP will be affected by many factors, including political stability, economic data, global economic environment and market expectations. Against the backdrop of increasing global economic uncertainty, the robustness of the British economy and political stability will become an important support for the value of GBP. At the same time, the direction of the Bank of England's monetary policy will also have a profound impact on GBP.

Under the current political situation, the steady pace shown by GBP provides confidence for investors. However, while optimistic, market traders should also remain vigilant and pay close attention to various factors that may affect the trend of GBP.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Under the new political situation, will the pound rise or fall in the future?

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