Forex Field Guide for Pound Sterling (Sep 2022 GDP, Sentiment 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 final report for Q2 printed on September 30th and showed an expansion of 0.20 percent which is 0.30 percent better than expected (-0.10) but 0.50 percent lower than Q1 (0.70). Manufacturing fell 1.1 percent, Services rose 0.2 percent.

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

The preliminary Q3 report will be available on Friday November 11th.

-CONSUMER PRICE INDEX RATE (CPI)-

The August rate that 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)