Brexit trouble return, energy crisis, financial consolidation And the high risk of UK stagnation is enough to sell GBPUSD. Let us discuss the Forex trend and make a trading plan.
Weekly Pound Basics Forecast
During these troubled times, stagflation has already taken place in many countries. Many others are already on the line. However, the toxic mix of low GDP growth and high inflation has hit the UK hard. This fact allows Andrew Bailey to say that the Bank of England faced the toughest job since independence in 1997 and actively trades on the pound. The net GBP has soared to its highest level since 2019 and it looks like an increase. not the end
The dynamics of GBP trading
The high probability of a UK economic downturn is not the only deterrent to the GBPUSD bullish. The European Union is threatening to sue the UK for improper border control arrangements in Northern Ireland. This was followed by an increase in import taxes. The trade war could further increase the negative UK foreign trade balance. So there are rumors that the war will hurt the price of the pound.
While other countries and regions are trying to support their economies through financial incentives. The UK Treasury has already started the tax. This would make the cost of living crisis the worst in decades. and pushing the economy into recession
Peak inflation remains the UK’s main concern. In April, it hit 9% for the first time since 1982. Consumer prices rose faster than any other G7 country. There are many reasons for this. First, the UK is facing an energy crisis as severe as the rest of Europe. In this regard, energy costs in April were 69% higher than last year. Second, due to Brexit, potential production cuts. go down This led to higher prices and high demand. Finally, the UK labor market became very hot. as in the US
Changes in inflation in G7 countries
Source: Financial Times
Unemployment fell to 3.7 percent in the first quarter, its lowest level in 47 years, although employment fell below pre-epidemic levels as people left the labor market. This forces employers to compete for employee positions and raise salaries. Salary growth of 7%, including bonuses, is a major concern for the BoE.
The BoE’s forecast of a CPI soaring above 10% in 2022 isn’t as bad as the assumption that high inflation will continue longer in other countries. Legislators accused the regulator of falling asleep at the wheel. In other words, this means that the BoE started to raise interest rates too late. The futures market considers the potential for financial constraints. UK borrowing costs are forecast to rise by just 120 basis points by the end of the year. This is lower than in the United States (+200 bps) and comparable to the Eurozone (+110 bps). HSBC forecasts that the BoE rate will increase to 2.5% by mid-2023, after which it must decline.
GBPUSD trading plan for a week
So the UK and Pound have so many problems that a slight correction of GBPUSD would be a good opportunity to sell both in the 1.2 direction.
GBPUSD price chart in real time mode
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