Markets brace for a series of economic data and events from the Old Albion over the coming days, which have the potential to spur volatility and determine the trajectory of the British Pound. The UK government is expected to provide an update on its economic plan with the Autumn Statement on Thursday, after September's mini-budget debacle by the former PM, which roiled financial markets.
CPI Inflation stood at 10.1% in September and forty-year highs, with the October figures due on Wednesday, while the Bank of England projects it to peak at around 11% this quarter . Today's jobs report showed that wage inflation grew, as average weekly earnings (excluding bonuses) in the July-September period rose 5.7%, from 5.5% previously, while Unemployment ticked up to 3.6%.
According to preliminary data from Friday, the UK economy contracted by 0.2% q/q in the third quarter, with the central bank forecasting a prolonged recession.
GBP/USD comes from its best week in over two years, helped by the soft CPI Inflation report form the US, which led to an easing of market expectations around the Fed's rate-hike path and a decline in the greenback.
It has recovered by around 15% from the September record lows (1.0356) and is upbeat today, above the 38.2% Fibonacci of the 2022 high/low slump. It looks like it has the technical room to contest the 50% Fibonacci and the 200Days EMA in the 1.2052-1.2110 region, but it early to talk about a broader advance towards and beyond 1.2407-53.
Despite the impressive recovery, the US Fed is more aggressive than the Bank of England and Chair Powell pointed to a higher terminal rate than previously expected, even if the pace of hikes slows down . GBP/USD shows some indecision at the start of the week and is susceptible to downward pressure. The 1.1440-1.1330 area though, contains a confluence of supports and catalyst would be required for a breach that would expose the pair to 1.0960-22.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
Retrieved 15 Nov 2022 https://www.bankofengland.co.uk/monetary-policy-report/2022/november-2022
Retrieved 30 Nov 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20221102.htm