Sterling : Life beyond the shackles
Last year in June, United Kingdom's majority chose to leave the European Union. This year on March 29th Prime Minister Theresa May invoked Article 50 of the Lisbon Treaty, officially stamping the process to sever ties with the bloc.This brings to end a 44-year-old relationship that always had National political parties at odds, will the UK be better off without the Union or with.Most economists hold a negative view of the Brexit.They warned the public that a Leave win could have acute but serious consequences for UK economy, an immediate increase in unemployment, inflation etc. Their predictions were wide off the mark.Although inflation increased unemployment is at a record low since 1975.This is a good indication that separation from EU would be good for the UK economy in the long run.The UK once fully segregated from the Union and the regulatory burdens of trade policy could benefit immensely by adopting their own free trade policy with major world markets.
There are more than 2 million EU nationals working in the UK, a divorce would give British government control back over who it allows to live and work, hence more work opportunities for Britons.After Germany, Britain is the second biggest contributor to the EU budget, leaving EU would mean all that money would be used for the national budget.But what the UK actually stands to gain will depend on the terms of negotiating with EU.It might be possible that EU could force UK to keep contributing to EU budget if they want access to EU Single Market.There have been hints that Britain will have to pay a hefty exit fee to EU that could run into tens of billion Pounds.Whether Brexit will bring about economic gain or loss for the UK can only be speculated as of now.I am not an economist but an investor and a trader, from my standpoint the worst for GBP is over.
Pound in the midst of US Civil War in 1864 reached a value of $10. After the high of $10, its value started to drop and continued the downward slope for over a century against USD. A drop that started in 1864 halted in 1985, which almost brought it down to parity with the USD at 1.0438.I believe that the low of 1985 will remain to be a historical one as I do not see that low being taken out for decades.An unprecedented event like Brexit threw Sterling in a tizzy, it dropped over 1800 pips against the USD in one day after a Leave win was confirmed. And over the next few months, it kept trading lower and stabilized after hitting a low of 1.1980 in October 2016.Now it has started to get back up and is gearing to move upwards from here.The low of October 2016 will remain a very strong support for a long time to come.
Coming to the analysis I'm expecting GBPUSD to make a short-term high in last week of October or first week of November. Then a low in last week of November to the first week of December. high in the first week of January and a major low around the first week of February. Then major high around last week of February or first week of March. Highs should be higher highs unless a low is broken, and lows to be higher lows as well.
As always, will update as and when changing dynamics necessitates so.
There are more than 2 million EU nationals working in the UK, a divorce would give British government control back over who it allows to live and work, hence more work opportunities for Britons.After Germany, Britain is the second biggest contributor to the EU budget, leaving EU would mean all that money would be used for the national budget.But what the UK actually stands to gain will depend on the terms of negotiating with EU.It might be possible that EU could force UK to keep contributing to EU budget if they want access to EU Single Market.There have been hints that Britain will have to pay a hefty exit fee to EU that could run into tens of billion Pounds.Whether Brexit will bring about economic gain or loss for the UK can only be speculated as of now.I am not an economist but an investor and a trader, from my standpoint the worst for GBP is over.
Pound in the midst of US Civil War in 1864 reached a value of $10. After the high of $10, its value started to drop and continued the downward slope for over a century against USD. A drop that started in 1864 halted in 1985, which almost brought it down to parity with the USD at 1.0438.I believe that the low of 1985 will remain to be a historical one as I do not see that low being taken out for decades.An unprecedented event like Brexit threw Sterling in a tizzy, it dropped over 1800 pips against the USD in one day after a Leave win was confirmed. And over the next few months, it kept trading lower and stabilized after hitting a low of 1.1980 in October 2016.Now it has started to get back up and is gearing to move upwards from here.The low of October 2016 will remain a very strong support for a long time to come.
Coming to the analysis I'm expecting GBPUSD to make a short-term high in last week of October or first week of November. Then a low in last week of November to the first week of December. high in the first week of January and a major low around the first week of February. Then major high around last week of February or first week of March. Highs should be higher highs unless a low is broken, and lows to be higher lows as well.
As always, will update as and when changing dynamics necessitates so.