GBP Will Further Weaken Due to the Unfavorable Politico-Economic Environment| KOL Analysis•Jasper Lo

Both FTSE 100 Index and GBP have poor performance in the first half of 2020 – FTSE 100 drops 17% and GBP/USD drops 7%; on the contrary, the CHF/USD has made a significant growth of 2%, which out-performs other currencies in European continent.

The reason of poor performance is mainly due to the prolonged influence of COVID-19 pandemic where the UKs economy seems to be less likely to have V-shape recovery as the US does. Boris Johnson plans to increase the expenditure on public utilities and infrastructure; however, the market worries that how he can get enough funds for those projects and the budget deficit will further worse off, leading to lower the sovereign ratings of the UK by various rating agencies.

Meantime, the sluggish progress of trade arrangement negotiation between the UK and the EU also makes the market suspect of ending of transition period without any arrangement being concluded. Though another round of negotiation has been scheduled on 3 July, Boris Johnson claimed that it may follow “Australian Terms” to exit the EU in case there is no agreement reached before deadline. It implies the UK will only reach agreement based on a few product categories; others would be based on rules of WTO.

David Frost, the UK's chief Brexit negotiator, stated that the EU should forget the unrealistic proposition to give way for the further negotiation. The UKs financial regulatory authority has also advised the financial institutes to prepare for “hard Brexit”; the stocks and derivatives trading would be halted if they cannot be traded across border between the UK & EU market.

Angela Merkel, Chancellor of Germany, Rotating Presidency of the Council of EU, said that the negotiation is less likely to make progress though both sides have agreed to speed up the process and expected to finalize the deal before the fall of this year. Therefore, the EU will also prepare for “hard Brexit” without reaching any trade agreement. So, the market is not optimistic towards the new rounds of negotiation.

S&P, the credit rating agency, alerts that if the new round of negotiation fails and the outbreak of 2nd wave of COVID-19 pandemic occurs, the UK may experience “perfect storm” in financial market next year; and therefore, has further adjusted the estimated economic recession rate down to -8.1%. Under the attack of COVID-19 pandemic, the UK just announced that the 1st quarter GDP rate had dropped to -2.2%, the largest quarterly drop since 1979. Both IMF and OECD have turned to be pessimistic towards UK economy – IMF (over -11.5%) and OECD (-11.5%).

It is estimated that Bank of England will have another round of quantitative easing and will adopt negative rate in the 2nd half of 2020; making GBP tends to be on downside. GBP/USD support level would be at both 1.2069 and 1.1959; however, if it fails to break this level, GBP would have a more catastrophic result.

[About The Author]

Since 1987, Jasper Lo has been engaged in the financial industry (forex, futures and gold) for more than 32 years and holds forex R.O., securities and futures broker licenses. Mr Lo is an expert in trading forex, precious metals and commodity futures and an basic and technical analyst.

Over the years, Mr Lo won many individual and team sales champion awards, as well as outstanding employee awards. He was invited, as a guest mentor, to the University of Hong Kong, Guangdong Ocean University and Guangzhou Jinan University. And he was also appointed as the chief training consultant by Hantang Securities and Dongguan Securities in China.

Mr Los experience as guest of honor invited by media including Chinese and English newspapers and columnist:

-Guest of honor invited by TVB New Channels such as Finance Channel, Forex Focus, Global Watch

-Guest of honor invited by Now Finance Channel - Forex Reports

-Guest of honor invited by i-CABLE Finance Info Channel - Forex Opportunities

-Guest of honor invited by ViuTV - Investor Smarter Group

-Columnist of Finance and Forex Market of Ming Pao

-Presenter of Finance and Forex Forecast of Ming Pao

-Presenter of Investment 36 Stratagem and Technical Analysis in 1 Min of Ming Bao Finance

-Appointed lecturer of Ming Pao Investment Seminar and Paid Course

-Author of the best seller Investment 36 Stratagem

-Columnist of Forex Expert, Forex Analyst, Marathon Weekly of ET Net

-Guest of honor of Open Good Morning of ET Net

-Guest of honor of Metro Finance Channel - Market Opening, Instant Market Fighting, Guangdong-Hong Kong Finance, Finances Power, Market Analysis

-Guest of honor of New Era of Investment of RTHK

-Columnist of Capital Commodities of Capital Weekly

-Guest Presenter of Wang Guanyi Online Finance Channel - Fund and Commercial Bond

-Columnist of Wealthub Finance and Investment Smart Platform of Enrich Culture

-Guest presenter of Weekly Investment in the World of Enrich Culture

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