Currency markets have been fixated on the British pound ever since the historic Brexit event that changed many of the ways currency traders view political elections. Many of the initial trends have already started to reverse themselves, and we are now seeing the pound/dollar moving higher toward the 1.30 mark. Most of the activity in the British pound has been positive, and we are seeing this in a variety of different currency pairs in the foreign exchange markets.
In terms of the historical price performance in the U.K. currency, it is important to understand the nature of the region and its economy. For the Bank of England, the most important economic factors tend to be consumer inflation and home prices in the real estate market.
UK Markets and World Economy
These are two of the issues that will need to be assessed by the currency markets in order to determine the next trend in the British markets and in the pound relative to the other majors. Key examples here include the euro, Japanese yen and the Chinese yuan renminbi, which have also seen some important changes with respect to the increasing trade relationships that have been accumulated over the last five years.
This largely explains why we have seen surging popularity for English schools in Manchester, which help facilitate these types of business transactions. Trade relationships have benefited both the U.K. and Asian nations, and this will continue to have an important influence on the pound into the second half of this year. Better foreign transaction reports in the U.K. should push the pound/dollar well above 1.30 as U.K. trade balance figures between the British economy and the Asian economy have had some significant gains over the last several quarters.
In the chart below, we can see the recent market activity in the British pound versus the U.S. dollar. From the beginning of the year, we have seen strong trends in the pound with a series of higher lows marking the yearly uptrend. We can expect these types of moves to continue as long as support at 1.26 remains intact as this would suggest further gains could be in store against the euro, yen and yuan renminbi. There are still some differing views in terms of the short-term and the long-term chart outlooks.
The hourly charts actually look as though a small downtrend started to develop after the previous failure ahead of 1.30. This is why it will be important for traders to watch for the various ways markets behave at the lower support levels. From an indicator perspective, we are still not seeing the forex pair GBP/USD enter into overbought regions; this is most likely because of the relatively stable uptrend that we have seen in the currency pair.
Overall, we can expect these types of market trends to continue as long as the U.K.-Asian trade figures continue to hold up. There is scope here for the pound to recover in terms of the post-Brexit moves in the currency against the greenback and other majors.