​GBP Set to Decline in 2021

WikiFX News (2 Jan.) - GBP/USD is set to decline amid the challenges to the UK's economy in 2021, albeit recent boost of the Brexit deal.

GBP/USD retreated to 1.3466 on the first trading day after the Brexit day, attributed to the UK's gloomy economy.

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The UK government forced the closure of some shops amid escalating Covid-19 infections. Figures show that the number of UK physical and online retailers facing “significant” financial distress leaps 24%, compared with the same period last year.

While UK GDP grew by 16.0% MoM in Q3 2020, it was still 8.6% below where it was in Q4 2019, said Economist Ruth Gregory. An extended lockdown could push the economy to dip again.

Besides, the Bank of England is expected to leave the benchmark interest rate at 0.1% and hold the size of its quantitative easing program at £895 billion.

In terms of Brexit, there is no longer general access to each other, which will shock the service market. “Our GDP forecast for the recovery in 2021 has fallen from 5.1 percent to 3.9 percent, and thereafter to 1.7 percent in 2022; not until 2024 is the trend rate of growth regained,” Economists at Handelsbanken said, “with our central forecast being that GBP/USD moves to 1.23 by mid-2021.”

Chart: Trend of GBP/USD