🇬🇧 How to Trade the Pound Sterling this week (WN39) 🇬🇧
Week commencing the 26th of September
Analysis determines that the Pound Sterling is to be sold against stronger currencies ($GBPUSD) prior to the GDP data on Friday. If the report shows an expansion then any shorts should be aborted and planned for a higher re-entry.
The Monetary Policy Committee (MPC) of the Bank of England (BoE) met last month on the 22nd of September and a decision was made to hike the Bank Rate (Interest Rate) by 50bps to 2.25 percent from 1.75 percent which was as expected. The policy outlook is slightly hawkish as Trading Economics are forecasting it to remain at 2.25 percent this quarter whilst in August, the MPC projected 3.00 percent by Q3 next year in 2023. The next scheduled meeting for the Monetary Policy Committee is next month on Thursday the 3rd of November.
With regards to economic indicators, the CPI rate for the twelve months to August was reported a couple of weeks ago at 9.9 pecent which was below expectations of 10.2 percent and the first inflation easing in eleven months and was led by the fall in motor fuel (32.1 vs 43.7).
The near-term attention of speculators is on the final GDP growth rate report for Q2 over Q1 which releases on Friday and is expected to show a 0.1 percent contraction. This is a lagging indicator but would be reflective of a worsening situation.
The sentiment that is presently influencing the valuations on the Pound Sterling is the narrative regarding the economic slowdown and how fast it progresses. The recent indicators suggest that the situation is worsening faster than expected, especially with the retail sales contraction at more than a percent below expectation. However - last Friday the new Chanceller, Kwasi Kwarteng announced an income tax reduction and removal of red tape with the goal of stimulating growth. The immediate market reaction was overwhelmingly pessimistic as funding through borrowing will burden the economy for decades if this gamble does not work out.
Subscribe with a 50% discount to view 'Forex Field-Guides' which offers a more comprehensive research report packed with information that is intended to be used so you can improve your own analysis.
-END DISCLAIMER-
The content provided is intended for informational purposes only. Investments on the forex markets and trading decisions are made at your own risk.