UKs inflation rate in April fell to 0.8% to the lowest level for nearly four years. Under this situation, the UK is likely to enter a deflationary age, bringing the pressure that Bank of England(BoE) would cut interest rates below zero.To get more news about WikiFX, you can visit wikifx news official website.
　　Andy Haldane, the BoE‘s chief economist, commented last week that negative interest rates are a near-term possibility. While, the BoE’s governor Andrew John Bailey who kept objecting to negative interest rate, changes his attitude in a softly manner and starts to take into consideration countries applying negative interest rate policy.

　　In addition to the trouble about deflation and negative interest rate, the trade negotiations between the UK and EU came to a deadlock. Britain‘s negotiator David Frost blamed the UE for a worse draft and critically expressed the unfair draft for the UK in a 4-page open letter, and urged the EU’s chief negotiator, Michel Barnier, to think it twice.
　　It is estimated that before the next round of negotiation on July 1st, the constant tension between two sides would hurt pound more. Even though the second negotiation may take a dramatic turn, the pound couldnt avoid dropping in the following week under the shadow of the unsuccessful negotiation.
　　The Office of Budget Responsibility(OBR) estimated that the UKs budget deficit would reach 298 billion pounds in 2020 to 2010. So most British businessmen believe that the government will increase taxes in response to the battered budget deficit suffered by COVID-19.
　　It is a remarkable fact that leaving aside the question whether the UK and EU will end transition under the trade agreement, the UK will face another political crisis next year that Scotland is determined to hold a referendum on independence from the UK in 2021. The “Gray Rhino” event really makes it easy for pound to drop and hard to rise.
　　As the graph shows, GBP/USDs support levels are at 1.2069 and 1.1959. If it breaks below both levels, GBP/USD is likely to challenge the key support level of 1.1409 again.
　　If the negotiation between the UK and EU takes a dramatic turn, GBP/USD also has an opportunity to return to the double top situation with the resistance level of 1.2643.