The UK hiked interest another 50 basis points this morning. Rates are now at 1.75% and inflation is still projected to be much higher next quarter. Here is our outlook on the pound and where we think it will be going in the future.
Our Outlook on the Pound
As output decreases and inflation sits at highs from the 80s, forecasts are now expecting that the economy will enter a recession this year. Growth has not been very impressive in 2022 as contractions continue to fuel bearish sentiment in the UK..
It also looks like the pound is struggling with these aggressive hikes, similarly to the euro. BoE is still dedicated towards the inflation curb, but the economy may suffer as a result.
Analysts also expect inflation to finally reach its peak in October of this year at 13.3%. This will take years to eventually come down to reach its 2% target.
Pound Pair Setups
GU bounces off support on the 1D timeframe again and is coming up to the break even level. The recent break above a falling long term trend line is a bullish sign for the pair for a potential momentum shift. Resistance sits at 1.23110. If price breaks under current support, we could see the pair move lower towards 1.19400s.
GBPJPY falls lower on the 1D after the BoE's rate hike decision. Price got rejected from the highs as it retraced from resistance. The pair might try to move lower to test 159.500 if the downside continues. After the recent break under a supportive trend line, we could see a shift towards a downtrend as pound weakness continues.
GBPAUD has been channeling sideways since April which is a promising setup on these supply and demand zones on the 1D timeframe. After each test on the low, the pair eventually makes its way back up to the 1.77000s. So, this pair looks to be a good channel trend play.
On Friday this past week, the United Kingdom’s Office for National Statistics released the latest reports on the UK’s Gross Domestic Product (GDP), a means of measuring economic output. It was revealed that their economy grew by -0.6% month-over-month, and -0.1% quarter-over-quarter, which entails a contraction for both timeframes. Although these numbers are less disastrous […]
This week the public received startling news: on Wednesday morning, month-over-month CPI (a proxy for inflation) in the United States had unexpectedly remained static, clocking in at 0% whereas a moderate 0.2% increase had been forecast. Core CPI (which excludes food and energy prices) likewise came in lower than anticipated at 0.3% month-over-month, while Thursday […]
Next Tuesday, the RBNZ will announce their new official bank rate which is expected to be 3%, a 0.50% rise from July. This hike will make it the highest yielding major currency on the market. Here is why you should consider buying the kiwi before Tuesday's decision as well as some strong NZD long setups. […]
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here