GBP/USD limited below 1.2075, with support above 1.2000

• The pound remains within recent ranges, unable to break the 1.2075 resistance.
• Worries about China and Ukraine weigh on the currency.
• GBP/USD is heading for its worst year since Brexit.

The pound is still unable to take advantage of a weaker US dollar on the last trading day of the year. The pair has failed to break above 1.2075 and continues to move within a 60 pip range, with the 1.2050 zone in the middle, for the second day in a row.

China and Ukraine and the dovish attitude of the Bank of England weigh on the pound sterling

Concern over the rapid expansion of coronavirus cases in China has led to some caution during the last half of the week. The reports from independent sources that speak of 9,000 daily deaths contrast with the information from official institutions that report 5,000 new infections and a single death on Friday.

These contradictions have led several countries to impose mandatory COVID-19 tests on all arrivals from China and are casting doubt on the strong economic recovery of the Asian dragon, triggered by the end of the “zero COVID” policy.

In addition, the Russian army continues to heavily shell kyiv and other Ukrainian cities for the second day in a row, following the Kremlin’s refusal to accept Zelensky’s peace plan. The increase in tension in the eastern European country further weighs on risk appetite.

In it United Kingdombleak economic prospects forced the bank of england to get off the pedal of the rate hike in December. This was taken by the markets as a sign of a slowdown in the tightening cycle, which has added negative pressure on the GBP.

Political uncertainty and a weak economy have crushed the pound in 2022

The pound sterling will close the year with a decline of close to 11%, in its worst annual result since 2016, when Brexit won the referendum by a minimal margin.

Political uncertainty about the last days of Boris Johnson and the failure of Liz Truss in terms of fiscal policy, followed by the new change of authorities, hit the pound throughout the year. At the end of September, the pair rebounded strongly, paring losses of around 20%.

Against this background, economic indicators have confirmed the strong impact of Brexit. The UK’s post-pandemic recovery has lagged behind the world’s major economies, with GDP still 0.4% lower than in the last quarter of 2019 and high inflation, making the cost of lives of British citizens into a nightmare and poses a serious challenge to the Bank of England.

technical levels