Trade agreement between the UK and the USA | 17 September 2020

17 September 2020, GBP/USD

Trade agreement between the UK and the USA

GBPUSD trading plan:

Britain's foreign minister said that he was confident of a post- Brexit free trade deal with the United States. "We discussed progress on our Free Trade Agreement negotiations since we last met, and the importance of a clean, resilient, economic recovery from COVID-19," Foreign Secretary Dominic Raab said. This is positive news for the British currency. The yield on short-term US Treasury bonds is within the range of the FRS discount rate of 0-0.25%, and with the growth of inflation, the negative real yield increases. For example, last month inflation was at 1%, and the yield on annual bonds was 0.12%. This resulted in a negative real yield of 0.88%. Now inflation is 1.3%, and the yield on bonds is 0.14% - the negative yield has increased and is 1.16%. Investors need positive real profitability, they want to earn, but in American bonds this will not be possible, which contribute to a decrease in the dollar exchange rate.

Trading recommendation: Buy 1.2945 and take profit 1.3014.

David Johnson
Analyst of «FreshForex» company
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