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GBP/USD forex forecast for 28.04.2020

April 28, 2020

April 28, 2020

Pound set fire to fleetDmitri Demidenko

When all the major currencies are exposed to the risks, the market is

dwelling on the global risk appetite

The pound’s strength looks surprising. The domestic data are extremely poor, the Brexit matter hasn’t been settled down, Boris Johnson’s government is not willing to extend the transitions period, and the coronavirus fallout can damage the UK economy more than the previous global financial crisis. The BoE forecasts the UK GDP should drop by 35% in the second quarter. Nonetheless, despite all the negative factors, the [GBP/USD][1] rose up from the bottom of the [consolidation range 1.22-1.26][2] and is now driving up to its top.

Bad news for the sterling started form the inflation report, the UK inflation rate was down from 1.7% to 1.5% amid a substantial decline in the domestic demand due to the pandemic, and it is likely to be moving down from its 2% target. The far, the worse. The UK composite PMI was down to a record low (12.6) in March, the retail sales featured the worst crash ever (-5.1% M-o-M). The GFK’s UK consumer confidence held at its lowest since 2009 this month after tumbling in late March. As a result, the UK economic surprise index is falling, however, the [GBP/USD][1] bulls are going ahead.

Dynamics of the Pond’s index and the UK economic surprise index

![LiteForex: GBP/USD forex forecast for 28.04.2020][3]

Source : Bloomberg

Earlier, the pound’s buyers hoped that the UK and the EU will reach a compromise on Brexit, or the transitions period will be at least extended. In April, there are hardly any hopes for the better. According to, Michael Gove, Cabinet Office minister, “whenever a deadline was extended, the light at the end of the tunnel was replaced by more tunnel”. The longer is the transition period, the more money will the UK contribute to the EU’s budget, and it will need to follow the EU rules, which are likely to be rejected in sovereignty.

Therefore, despite the horrible domestic data and swampy political environment in the UK, the sterling continues rising. The pound’s strength seems even more surprising if you look at the speculative positions on the pound. Over six consecutive weeks, hedge funds were exiting longs on the GBP, the market turned bearish on the British currency for the first time since December 2019.

Dynamics of speculative positions on the pound

 ![LiteForex: GBP/USD forex forecast for 28.04.2020][4]

Source : Reuters

What’s the matter? Could the [GBP/USD][1] crash in March be so deep, that the bad news has been priced? I think it makes some sense. However, this is not the only reason for the pound’s resilience. When the economic situation is almost equally grim across the globe, markets are more fixated on swings in sentiment and risk appetite. Many investors think that the Brexit is a tiny reason compared to the coronavirus and recession, so they buy the sterling expecting the economies to reopen soon in the USA and UK, which should support the S&P 500 and press down the U.S. dollar.

Nonetheless, weak domestic data and continuous political uncertainty are the factors that limit the [GBP/USD ][1]rally. Therefore, I still stick to my [previous forecast ][2]suggesting the pair’s middle-term consolidation in the range of 1.22-1.26.

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Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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Price chart of GBPUSD in real time mode

![Pound set fire to fleet][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. my.liteforex.com/trading/chart?symbol=GBPUSD&returnUrl=true
  2. www.liteforex.com/blog/analysts-opinions/pound-sees-a-light-shining-in-the-clouds/
  3. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/gbpusd-surprise-28-04-20.jpg?w=30&s=e6346c8542ca950ee1f3a342e098625e
  4. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/net-position-pound-28-04-20.jpg?w=30&s=c88ea205f79cbe379c5c505372bd594a
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  7. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-gbpusd-28-04-20.jpg?q=75&w=1000&s=6a8af6edd6375b4bc74d726a167725e4