GBP/USD has been clinging to 1.39 ahead of a potential storm as the pound awaits three critical events. Yohay Elam, an Analyst at FXstreet, explains why BoE, Brexit and Scottish fears may disappear.
Investors await potential BoE tapering, the Brexit clash in Jersey and elections in Scotland
“The Bank of England is set to upgrade its economic forecasts in the Monetary Policy Report. Investors speculate about a potential tapering of the BoE's bond-buying scheme. If Governor Andrew Bailey and his colleague announce a slowdown in purchases, it could boost the pound. Yet even if they wait until their next encounter in June – or next ‘Super Thursday’ in August – it will likely keep the pound bid. In any case, the bank is set to unwind its pandemic emergency measures.”
“The UK sent two gunboats and France also reportedly unleashed a vessel to Jersey in scenes reminiscent of the 19th century. The military ramp-up is related to a planned protest by French fishermen. Will the two NATO allies fire shots over a minuscule issue? That is highly unlikely. The naval demonstration will probably come and go, while officials hammer out their differences.”
“Brits go to the polls on Thursday to vote in local and regional elections. The greater focus is on Scotland. The Scottish National Party and a smaller pro-independence outfit are on the verge of clinching a majority. If they succeed, it could open a long battle for another referendum, which poses a risk to Britain's economy. However, such a sweeping victory is far from guaranteed – and any attempt to hold another plebiscite would go through the courts. That means years of foot-dragging.”