The GBP/USD has risen by more than 2.50% this year amid a global pandemic and intense negotiations between the European Union and the United Kingdom. The pair is trading at 1.3475, which is 17% higher than the year-to-date low of 1.1416.
Brexit deal reached
The UK and the EU have been holding intense negotiations aimed at creating a good relationship after December 31st.
The two sides reached a deal last week, ending months of tense deliberations between David Frost and Michel Barnier. The agreement will prevent the two sides from imposing tariffs on one another. It will also prevent a physical barrier at the border, which means that trade will continue going on as usual.
A no-deal Brexit would have been terrible for the UK, which sells more than 45% of its goods to the EU. Indeed, estimates showed that the country would have lost more than 300,000 jobs in the first year alone. Also, the economy would have dropped by more than 2%.
Coronavirus and the weaker dollar
The GBP/USD rallied from March amid a global pandemic. The UK reported more than 2.3 million cases and more than 71,000 deaths. Similarly, the US confirmed more than 19 million cases and 335,000 deaths.
In response to the pandemic, Washington unveiled a stimulus package worth more than $3 trillion. The Federal Reserve also lowered interest rates and launched its open-ended quantitative easing program.
In the UK, the government launched a large support program that pushed the total debt to more than £2 trillion. The Bank of England also slashed rates and launched a large quantitative easing program.
In 2021, we believe that the sentiment will shift as investors start to worry about global debt. According to S&P Global, total global debt rose by more than $20 trillion in 2020. It reached $272 trillion, equivalent to 365% of total GDP. Worries of this debt will possibly lead to a stronger dollar, which will push the GBP/USD pair lower.
GBP/USD technical outlook
On the daily chart, we see that the GBP/USD pair has been on a steep upward trend since March this year. Recently, it has formed an ascending channel. It is also slightly above the 25-day and 50-day exponential moving averages.
Therefore, in the near term, the pair will possibly continue rising as bulls eye the resistance at 1.3600. In the coming year, however, the pair will possibly pull back and possibly test the support at 1.3000.
The post GBP/USD forecast: Is the pound a buy or sell in 2021? appeared first on Invezz.
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