WILL DECLINES DEEPEN IN GBPUSD PARITY?
While the number of people who lost their lives due to Covid-19 in England exceeded 36,000, it was announced that coronavirus tests, which gave results in 20 minutes in the country, were being tried. Regarding the Brexit negotiations between the European Union and Britain, the European Union Brexit Negotiator Barnier shared his non-optimistic expectations, while this development increased some tension on the Sterling side. On the other hand, Britain announced that the second phase of trade negotiations with the USA will take place on June 15-26.
In the UK, the Ministry of International Trade has announced that it has a plan to reduce customs duties after leaving the European Union. Although the appreciation of the Sterling assets after the announcement of this tax reduction plan supports the upward trend in the parity, the increases in the parity could not be permanent after the announced macroeconomic data.
The unemployment rate in the UK rose to 3.9 percent in the first quarter of this year. While this increase points to about 50,000 people, the number of unemployed reached 1.3 million. In the UK, the consumer price index in April indicated a weakness above expectations, with a shrinkage of 0.2 percent. While the UK manufacturing PMI figure exceeded expectations at 40.6 in May, the Service PMI figure increased at a limited rate of 27.8. In the UK, retail sales in April shrank 18.1 percent, well above expectations.
Looking at the US side, second-hand housing sales contracted by 17.8 percent, with an increase of more than 2 million in unemployment benefits. However, despite the weakness in these data, the US-China trade concern flared again in the markets after US President Trump criticized China for spreading the corona virus. Thus, with the increased risk factors, the demand for the dollar is triggered, and the parity continues to withdraw with the dollar pressure.
The fact that prices are below the 50-day moving average level of 1.2275 in the GBPUSD parity is important for the continuation of the withdrawal potential. Especially with the breaking of 1.2115 support in the pair, the declines can be expected to continue up to 1.20 support threshold. However, in a recovery that can occur in the pair, which is priced around the level of 1.2175, we follow the rises within the frame of the 1.2375 resistance.