2016-10-07 12:10:21

Today may be recorded as another “Black Friday” for the Pound On the low trading volumes at the beginning of the Asian session, the Pound fell sharply in the market.

Such a dramatic and large-scale decline could cause breakdown of the levels, and trigger stop loss orders, which provoked further decline in the Pound. The pair GBP/USD fell to the new 31-year lows below the level of $1.1200. The pair fell by 8% losing more than 600 points. Within one minute the Pound was quickly bought, and the pair GBP/USD rebounded by 400 points

Apparently, sharp decline in the Pound was provoked by the statement of French President Francois Hollande, who said in an interview with Sky News about the necessity of the stricter negotiation on the the British exit from the EU.

Mr Hollande said that the UK should pay a high price for leaving the EU, which would become a good example for other countries wishing to leave the EU.

At the beginning of the European session, the Pound slightly recovered but is still under pressure. The pair GBP/USD is traded at the level of 1.2460, which is by 160 points lower than today's opening price.

Today’s news will include:

At 15:30 (GMT+3): US nonfarm pay roll for September. According to the forecast number of jobs will rise by 172 000 and unemployment rate will remain unchanged at the level of 4.9%. This data may affect interest rate decision by the US Fed and build up voters’ opinion about the state of the country’s economy.

If the forecast will be correct, the USD may continue to rise, although high rise in price is not expected, as the positive data on the labor market has been already incorporated in price. In case of the weak data, the USD will fall sharply in the currency market.

At 17:00 NIESR GDP will be released. This index will show economic growth in the UK in the last three months.

The report is usually published before the release of the official GDP and can affect monetary policy of the Bank of England. The report will sharply increase volatility in pairs with the pound and in the index FTSE100.

Nevertheless, the pound will remain under pressure in the foreign exchange market because of the forthcoming Brexit procedure.

Prime Minister of Great Britain Theresa May said earlier this week that the official procedure of withdrawal from the EU will begin before March 2017.

In August, the Bank of England has downgraded economic growth forecast for next year to the lowest historic level and decreased the interest rate in the country to 0.25%, which is the lowest level in the past 300 years.

The Bank of England expects that economic growth in 2017 will amount to 0.8% against previously planned 2.3%.

The adherence of the Bank of England to extra-soft monetary policy will contribute to the weakness of the pound and will keep it at the low levels.

GBP/USD: Another “black Friday”.  Fundamental analysis for 07/10/2016