What Do the Economic Indicators Say About GBP

British general election at the end of 2019 was conducted against a sluggish economy. Latest statistics show that Britains economy growth is stagnant and the once strong labor market has weakened. In the first half of 2020, the pound will need to navigate through the domestic economy, central bank policies and the crucial March budget. In addition, the Brexit negotiation is still in its preliminary stage, whether a free trade agreement can be successfully concluded will also be critical.

After officially leaving the European Union on January 31st, Britain still faces more negotiation with the EU on the following transitional period,which means the pound‘s market trend will continue to fluctuate like last year. Investors should pay attention to PM Boris Johnson’s negotiations with the European Union, for if their meeting can‘t make substantial progress, it won’t be a good news for the pound.

Mark Joseph Carney whose term as Bank of England‘s chairman ends this March said that from the perspective of risk management, there’s a good reason for interest rate cut if the sluggish economic trend last year continues in 2020.Member of the BoE Monetary Policy Committee mentioned that if economy growth doesn‘t improve in the upcoming months, they will consider supporting interest rate cut. This further shows the British central bank is leaning towards implementation of more economic stimulus, so from medium to long term perspective, investors should be prudent about the pound’s future trend. The pounds axis point for the first half of 2020 is at 1.3119, and the pound will go weak if it falls below this level.