Sterling buyers are losing patience. Speculators added up to the biggest net longs on the British pound among the G10 currencies, and as soon as the bad news was published, they rushed to get rid of them. Let us discuss the Forex outlook and make up a trading plan for GBPUSD
Fundamental pound forecast for nine months
Hardly had the pound bulls smelled the trouble when the GBPUSD crashed to the bottom of figure 37 and the EURGBP performed the best daily rally since 2021. The UK changed its guidance on using the Oxford/AstraZeneca vaccine, recommending people aged 18-29 years alternative drugs after the European Medicines Agency announced a link between rare cases of blood clots in the brain and the AstraZeneca vaccine. The hottest trade of the current year was under attack, which immediately affected the sterling.
Reduced political risks after the Brexit agreement at the end of 2020 and a quick vaccination process in the UK made the pound one of the Forex favorites. Even the rapid rise in US Treasury yields and the associated strengthening of the dollar in March could not scare the GBPUSD bulls, which recovered most of the previous month's losses in early April. Alas, the real scale of the catastrophe due to Brexit is being hushed up by Boris Johnson's government, while the high speed of the vaccination process can be described by the expression "haste makes waste".
Official London has decided to disregard the vaccine manufacturers' recommendations for the 21-day interval between the first and second injection. Even though 37.4 million people, or 56% of the UK population, received at least one injection, compared with 50.9% of the US population and 8.6% of the EU, the number of complete vaccinations in the UK is lower than in the USA.
Vaccination rate in different countries
Source: Nordea Markets.
It would seem that nothing problematic has happened, the first stage will be followed by an equally fast second, but in reality, everything is different. Due to public distrust of AstraZeneca, the main vaccine that official London was focusing on, and due to a significant reduction in the supply of doses to medical institutions in April, the idea of a sterling rally against the backdrop of rapid vaccination process is fragile like a house of cards. According to ING, speculators hold the largest longs on the pound among the G10 currencies. Its sales on April 6-7 are understandable due to recent news.
Political risks have not completely disappeared either. The Office for Budget Responsibility predicts Brexit will cut UK GDP by 0.5% in 2021 and by 4% in the long term. Exports will be approximately 15% lower than if the country remained in the EU. The independent assessment allowed the opposition Labour Party to take shots at ruling Conservatives. According to the Labour, Johnson's government shows extreme arrogance in refusing to order an economic assessment of the Brexit impact. The cabinet is alarmingly relaxed over the suffering of British exporters.
GBPUSD trading plan for nine months
In my opinion, the UK will be able to overcome the difficulties with vaccines. The opening of the British economy at the end of April with the following rapid growth will contribute to the GBPUSD rally towards 1.44 by the end of December. At the same time, I would not rush to buy the pair until the GBPUSD price consolidates above 1.39.
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