Pound is saving the euro

The BoE's optimism has allowed the GBP/USD to soar above the psychological level of 1.3

With each passing month, the British traveling circus is more traveling and less - a circus. A more violent reaction of the pound to rumors and gossip of a political nature than to macroeconomic statistics has already ceased to cause a smile, and investors treat the sterling wandering from corner to corner with understanding. Really, one shouldn't jump the gun when, depending on the outcome of the negotiations between London and Brussels, the GBP/USD pair can soar to 1.35 or, collapse to 1.2? Wouldn't it be better to wait for the results of these negotiations? Well, a girl once waited for a prince. And then retirement came.  

The pound managed to escape from the area of 2.5-month lows against the US dollar due to rumors about the Teresa May signing an agreement on the access of British companies to the EU financial market based on equivalence principles. This means that the British will be granted the same rights as the Americans and the Japanese. Someone in the Conservative Party would like closer cooperation; someone, on the contrary, thought that without equivalence, London would have been able to get the status of the financial capital of the world much faster. However, when there is no choice, the process goes much faster:  

- I'm getting married tomorrow!

- For love? 

- Her father said, forever! 

Mark Carney threw some wood into the fire of sterling purchases by stating the need for a more rapid normalization of monetary policy than the market currently expects in case of a deal between London and Brussels. No deal, on the contrary, will force the central bank to throw all its forces on saving the drowning economy. The optimism associated with the BoE's policy and rhetoric has inflated the GBP/USD quotes at the fastest pace since April 2017. But let's not forget that optimism is only a lack of information. And it is bad when everyone is happy. You want to please people, but they are already happy... Simply put, the positive data is priced in the pound quotes. Now the US dollar serves.

The success of the sterling brought the euro back to life. The single European currency has recently got too many drivers: trade wars, the political crisis in Italy, Brexit, and the closing of the greenback position against the background of a potential slowdown of the US economy ... It seems that everyone it knows got driver's licenses. And the more friends gets the license, the more carefully you need to cross the road. The problem is that almost no one can get into the Forex paradise on somebody else's neck. Hope for the best, but prepare for the worst. And, let's be frank, the euro isn't doing so great. The eurozone economy is slowing, and thanks to the Italians, it is hard to see the makeup on the face of the single European currency. Rather, a face lift.

In my opinion, the enthusiasm of the Bank of England alone will not get the GBP/USD and EUR/USD bulls far.  The excessive desire to help see the light at the end of the tunnel sometimes ends badly. One boy broke his arm in six places showing someone how to get through the maze. Mark Carney and his team should be careful putting pink-tinted glasses on the pound and  euro fans.       


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Price chart of GBPUSD in real time mode

The Bank of England has put rose-tinted glasses on the pound

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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