Forex Field Guide for Pound Sterling (Sep 2022 Bank Rate Update)

Reference guide covering Fundamental, Sentiment and Technical factors of the UK economy

FUNDAMENTAL ANALYSIS

-BANK RATE-

The rate was hiked on September 22nd to 2.25 percent after an expected 50 bps hike. The projections published in August had raised the forecast for inflation (13% Q4) and lowered it for GDP (-2.1 to -1.5% Q3 2023) highlighting that a recession is highly likely for 2023.

The outlook for interest rates is slightly hawkish as Trading Economics forecast it to remain at 2.25 percent this quarter (Q3) while the MPC had it projected at 1.6 percent although they do forecast 3.0 percent by Q3 next year (2023).

The next meeting is on Thursday the 3rd of November.

-GROSS DOMESTIC PRODUCT GROWTH RATE (GDP)-

The preliminary report printed on August 12th showed a contraction of 0.10 percent in Q2 which is 0.10 percent better than expected but 0.90 percent lower than Q1 (0.80). Services fell by 0.5% in June and was the main driver of the fall.

The outlook for GDP is very pessimistic as Trading Economics forecast another 0.10 percent contraction this quarter (Q3) while the MPC estimates up to a 2.10 percent contraction by Q3 next year (2023).

The final Q2 report will be available on Friday September 30th.

-CONSUMER PRICE INDEX RATE (CPI)-

The August rate that was printed on September 14th showed 9.9 percent inflation which is 0.3 percent lower than expected and 0.2 percent lower than July (10.1). This is the first inflation easing for eleven months largely aided by the fall in motor fuel inflation (32.1 vs previously 43.7)