- Summary:
- GBPUSD pair declined slightly after Fitch downgraded UK debt from AA to AA-. The ratings agency blamed Brexit, Coronavirus, and UK debt for the action.
The GBPUSD pair declined slightly today as traders weighed the impact of a ratings downgrade by Fitch on Friday. When making the announcement, the ratings agency cited the UK’s challenge when dealing with Coronavirus and the risks posed by Brexit.
The UK went into a national lockdown last week as the number of confirmed cases increased. This decision came at a time when many businesses were closed or seeing fewer customers. As a result, most cities in the country are now abandoned and very few essential businesses are running.
At the same time, the country is in tough negotiations with the European Union. The talks, which are expected to continue through video link, will be difficult. This is because the UK has insisted on a Canadian-style relationship, which the EU has rejected. Instead, the EU has said that it will insist on a fair playing field for UK and EU companies. All this is risking the chances of a no-deal Brexit if Boris Johnson fails to ask for an extension.
In response to all these challenges, the sterling declined by 0.90% against the euro and by 55 basis points against the dollar.
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GBPUSD Technical Analysis
The GBPUSD pair declined from Friday’s high of 1.2484 to an intraday low of 1.2318. On the hourly chart, we see that the pair bottomed last week, when it made a triple-bottom at the 1.1435 support level. Since then, the pair has been on an upward trend in an equidistant channel. In addition, we see an intersection between the 14-day and 28-day VWMA indicators. I expect the pair to continue rising and retest the previous level of 1.2480.