GBPUSD finds support as PM Truss announces energy cap


The GBPUSD H1 chart has found support at the central pivot, P. Its trend following EMAs have crossed bullishly (black ellipse) as bulls defend the level. An underlying momentum may develop if the stochastic crosses positively and moves above 80 (blue arrow). If so, the longer the 80+ levels hold, the greater the potential swing for GBPUSD appreciation.

PM Truss bolstered cable support by announcing a cap on energy costs for the next two years, effective from 1 October. Households won't pay more than £2,500 pa on energy bills. The scheme will also help businesses for an initial period of six months.

Our concern is the financing for the scheme. Initially, the deficit spending and tight monetary policy may add support for GBPUSD. However, PM Truss has also promised to slash taxes, costing £38bn pa. This deficit increase may adversely affect the UK risk premium as gilts feel the pressure, ultimately exerting pressure on GBPUSD.

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Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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