🇬🇧 How to Trade the Pound Sterling (WN39 update) 🇬🇧
Updated on the 30th of September
Analysis determines that the Pound Sterling is to be monitored as the sell-off moves are retraced. Sell on comments from the Office for Budget Responsibility (OBR) that the fiscal policy is untenable.
The Monetary Policy Committee (MPC) of the Bank of England (BoE) met last week 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 2.75 percent this quarter whilst in August, the MPC projected 3.00 percent by Q3 next year in 2023 (although this was prior to the Truss governments fiscal policy changes). The next scheduled meeting for the Monetary Policy Committee is next month on Thursday the 3rd of November although some economists are expecting an emergency meeting to be called due to the collapse of the Pound Sterling.
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). Today (Friday) the final GDP growth rate report for Q2 over Q1 was revised up to a 0.2 percent expansion from the expected 0.1 percent contraction.
The near-term attention of speculators is on comments from PM Truss, Chancellor Kwatang or BoE Governor Bailey. Next week will see PMI data on Monday and Wednesday which will be of interest.
The sentiment that is presently influencing the valuations on the Pound Sterling is the narrative regarding the tax cuts growth plan that Chancellor Kwatang unveiled on Friday the 23rd of September. The office for budget responsibility (OBR) is to hold a meeting with Truss to better understand how the fiscal policy is to be financed. There will be a significant market reaction as details emerge.
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