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The pound suffers its worst week in more than two years

The pound suffers its worst week in more than two years

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The rally that scored the pound with the resounding victory of Boris Johnson in the elections has triggered an equally blunt correction in his quote. The pound deflates about 3% this week both against the dollar and against the euro, on its worst week in more than two years.

The British currency closes its second consecutive week of turbulence. Except for a sharp turn in today’s session, the pound will close its worst week against the dollar since October 2017, and will record its biggest weekly loss against the euro since July 2017. The corrective in the week is around the 3% barrier.

The pound delves in this way the way back and forth that it has undertaken in the last two weeks. On Monday, December 9, the week of the British elections began at the level of $ 1.31.

The increases prior to the day of the elections accelerated after the election result was known, which granted a much more resounding victory than Boris Johnson, with an absolute majority that allowed to reduce the uncertainty about his margin of maneuver to manage Brexit.

On his climb the pound came to exceed $ 1.35 on December 12, its highest levels in about a year and a half.

The rally of the pound was consolidated at the beginning of this week. Last Monday began above $ 1.34. Since then, it has undertaken a bearish spiral that has caused in the last few hours just below the $ 1.30 barrier.

The situation has been repeated in its crossing with the euro. The community currency today far exceeds 85 pence, 3% above the minimum of December 16 that registered against the pound, when it was about to lose 83 pence.

From elections to hard Brexit

The result of the British elections unleashed the euphoria about the evolution of the pound among the operators of the currency market, while accelerating the flight of the bears. But investors have turned around this week to the price of the pound, when checking the hard line that Boris Johnson will adopt on Brexit.

The British Prime Minister now takes advantage of his absolute majority to, in addition to maintaining the date of January 31, 2020 as a limit to officially implement Brexit, introduce a new clause that prohibits extending the transitional period beyond December 2020.

This change would block any possibility of extending the negotiations in case of not reaching an agreement, a scenario that has rekindled in recent days the fear of a hard Brexit.

Bank of England

The multiple news about the Bank of England have failed to cut the biggest weekly drop in the pound in more than two years. The central bank agreed yesterday, by seven votes in favor and two against, keeping interest rates unchanged at 0.75%.

Only a few hours later the market confirmed speculation about the chosen one to succeed Mark Carney at the head of the Bank of England. The nominee is Andrew Bailey, current CEO of the Financial Conduct Authority (FCA). Unlike Carney, Bailey has a more optimistic view on Brexit, which could have helped his election by the Boris Johnson Government.

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