GBP USD Forex Analysis - Baxia Markets

GBPUSD -0.71%

The pound sterling is on a five-day losing streak against the US dollar, the downtrend started on August 11th, and the price has lost 5.49% since then. Fundamental factors suggest that the downtrend will continue in the short term.

The UK released S&P Global Manufacturing PMI earlier in the trading sessions with a better than expected result of 47.3; analysts' consensus was at 46; however, the figure is below 50, indicating that there is a contraction in the manufacturing sector in the UK, negatively impacting the exchange rate of GBPUSD.

The US released Initial Jobless claims this morning; the result came out at 232K while the experts anticipated 248K. The US continues showing a solid labor market, holding up the US economic activity. The USD continues strengthening across all Forex major pairs.

The US also released S&P Global Manufacturing PMI with better than expected results of 51.5; the expert consensus was at 51.3. It is a slight improvement from the previous month. Still, most importantly, the figure is above 50, indicating that the overall health of the US economy is solid and continues to grow.

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GBPUSD +1.03%

The pound sterling continues to rally against the USD; the pair reopened with a positive gap and made some progress during the trading session after the release of high-impact economic indicators from the UK.

The UK released Gross Domestic Product for July; the result came out at 0.2%, short of the expert consensus of 0.4%; despite showing a weaker economic activity, the GBPUSD is up in the last two trading sessions. The UK also released Goods Trade of Balance; the result came out at -19.36B, a better than expected result by 3.03B.

More high-impact economic news will be announced tomorrow. The UK will release the Unemployment Rate, which gauges the strength of the labor market in the region. Analysts anticipate a 3.8%, which is unchanged from the previous figure.

The US will release the Inflation Rate tomorrow morning; experts anticipate that the inflation will drop to 8.1% from the previous 8.5%; the release of this economic indicator will affect the exchange rate of the USD against other currencies.

The USD fell to its lowest level in two weeks after investors starters closing the winning positions amid the hawkish remarks from Feds chair Powell last week.

GBP USD (Read more)

GBPUSD -3.47%

The pound sterling had its worst trading day since March 2020. The GBPUSD pair is down more than 7% in the last nine trading sessions and more than 20% in the year, reaching its lowest level in 37 years.

The Bank of England released an Interest Rate Decision during the previous trading session; the hike was 50 basis points and left the interest rate at 2.25%. Many saw this hike as a conservative move on the monetary policy given the rampant inflation in the UK, which caused the GBPUSD exchange rate to drop slightly in the previous session.

This morning, the UK unveiled an Energy Bill bail-out program that subsidizes the cost of energy and cuts taxes, estimated to cost 60 Billion pounds over six months. This news hurt the pound; with high inflation levels and BoE conservative interest rate hikes, it will be hard to restore price stability.

Analysts are already speculating on a possible aggressive hike from the BoE on the November Interest Rate Decision; the next hike could be up to 100 basis points as market participants are starting to raise concerns about high inflation.

The US dollar continues to be the king of currencies as it strengthened across all major forex pairs in the last trading session of the week. The US hiked the interest rate to 3.25% earlier in the week, and the US economy is showing resistance, which allows the Federal Reserve to continue the aggressive monetary policy to bring inflation down.

GBP USD (Read More)

GBPUSD -1.32%

The British pound is on a five-day losing streak and momentarily sank to its lowest level on record against the U.S. dollar at $1.03527; the previous low sat at $1.05200b back in February 1985. The markets reacted to Prime Minister Truss's financial package plan, in which they will cut taxes at various levels, including top-rate income and corporate taxes, elevating the country's borrowing.

The UK Prime Minister Liz Truss argues that "the change will turbocharge the economy, stave off recession and shake out a decade of underperformance" Experts believe that the mini budget released on Friday is raising fears of ramping inflation.

PM Truss plans to boost economic growth, which is likely to bring higher inflation to the U.K. This is the most radical tax cut since 1972, it surprised market participants, and they responded by shorting the GBPUSD. The tax cuts could have higher repercussions in the shot to mid-term as it threatens the state finances as there is also an expensive plan to subsidize energy in the U.K.

Last week the Bank of England raised the interest rate by 50 basis points; for some, this hike was not aggressive enough as inflation continues to be high; although it slightly went down in August, this is attributed to the lower cost of fuels.

The U.S. Federal Reserve is taking more robust measures. However, inflationary pressures are still high, and the U.S. stock market is falling; the USD continues gaining ground against all major Forex pairs this year, given its strong market labor.

GBP USD (Read more)

GBPUSD -1.31%

GBPUSD lost ground after a six-day winning streak; the USD regained strength with the release of S&P Global Services PMI and ISM Non-Manufacturing PMI, which showed a better performance than the previous month, strengthening the USD.

The pair is still on a downtrend as the long-term moving average is above the current price; the pair found strong resistance at $1.14954. If the support level on the 50% Fibonacci retracement at 1.13235 is broken, we expect the downtrend to resume. Volatility will be high in the short term.


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This publication does not provide financial advice for traders, and its only purpose is education. Use all the available information from different analysts and develop your own trading strategy. Trading forex and cryptocurrencies is not for everyone. You should only trade with money you can afford to lose. Past performance does not indicate future results.

GBPUSD could test support at $1.0812

The pound is on a four-day losing streak against the USD, and the general trend is downwards once again; the pair is losing the gains it made during the previous weeks. The price trades below the short and long-term moving averages, suggesting that the price could sink further down.

The Bollinger bands are wide, allowing high volatility in the short term; however, the upper band is starting to shrink, suggesting that the price could begin a consolidation phase in the medium term.

The relative strength index is currently at 41%, which will allow the pair to continue falling in the upcoming sessions; we could expect a short-term sentiment change once it gets closer to 30%.

The support level on our 23.6% Fibonacci retracement at $1.0812 could be tested in the upcoming sessions.

Upcoming Events

The United Kingdom will release the Unemployment Rate economic indicator in the next trading session; it is expected to remain unchanged at 3.6%; a figure higher than expected will be bearish for the GBPUSD pair as it suggests economic deacceleration.

Later in the day, the UK will also release Claimant Count Change, which gauges the number of people looking for unemployment benefits. Experts anticipate an increase from 6.3K to 10K this month. A higher figure will hurt the British pound against other currencies.

Later in the week, the UK will also release Gross Domestic Product MoM and Goods Tarde Balance, which will significantly impact the GBPUSD exchange rate.

GBP USD Read more

And read more useful trading insights at https://news.baxiamarkets.com/

This publication does not provide financial advice for traders, and its only purpose is education. Use all the available information from different analysts and develop your own trading strategy. Trading forex and cryptocurrencies is not for everyone. You should only trade with money you can afford to lose. Past performance does not indicate future results.