Pound Sterling is up and reaching its highest level in more than two years. It is a good start, but many experts still warn about the excessive optimism for that currency. It is especially in the middle of British economic uncertainty.
Most of the people believe that the economic condition there will have a further decline. There are some reasons for that. The strongest one is the effect of lockdown which is extended in several countries to handle the coronavirus spread.
It is known that in a lot of places, the cases of COVID-19 positivity are still high. Furthermore, a new variant of the virus was also found. That becomes a concern for many parties and government always wants to protect their people.
The Prediction of Risk
In the market, the GBP / USD currency pair was up. It is for about 0.39% and becomes $ 1,3740. For your information, that was the highest since March 2018. An analyst then gave his statement about the condition of the Pound Sterling.
He thought that the Sterling optimism was too much. They also see the disappointing expectation risk because of the situation. That is why; it is better to be more careful in ‘betting’ and having a transaction on the Sterling rises.
In fact, that thing and condition are quite reasonable. It was because Pound has been experiencing the optimism wave for weeks. That was especially after the British and UE avoid the no-deal Brexit. However, it is not the end for everything.
There are some questions that need to be answered due to the British economy from Brexit and the extended lockdown steps. As time goes by, those questions may be answered with the situation that will be happened in the market.
Confirmation from Boris Johnson about Lockdown
England is one of the countries where the new variant of coronavirus is found. That condition pushes the country to extend its lockdown decision. This thing was confirmed by Boris Johnson, a Prime Minister there on Wednesday last week.
He said that it will be extended for 5 weeks long. If it is so, the lockdown decision is applied until 8 of March 2021. He stated that the decision is taken since the government wants to handle the virus spread and push to decrease the positivity race.
It is hoped that the step will give enough time for them to wait for the released vaccines. For your information, there are several vaccines that are used in the world right now. Those are like the Pfizer, Sinovac, Astra Zeneca, and many more again.
There the market participants can easily note and see the high uncertainty. Why? It is because that will be difficult to say how this pandemic will develop in a short-term period. It is also hard to know how fast the lockdown could be decreased.
The Economic Prospect Is Still Uncertain
Basically, the condition described above shows that the economy is still uncertain until now. Meanwhile, Brexit is only functioned to ‘flame’ that condition. The worse thing is that people don’t know how that situation will affect the British economy in the future.
With that background, the further interest rate reduction of BoE is not released yet from the agenda and meeting next week. It is when the monetary policy report will be launched as well. It seems that these conditions will be used as research.
However, most of the experts agree that although there is a chance from the outside about the interest rate decline, BoE will be more choosing the obligation purchase program. It is done to support the recovery because the Central Bank wants to make a better situation.
