In the UK, the cost of living crisis affects one in every four homes.
February 8, 2023 3:23 pm
The situation in the UK is deteriorating, while stock indices in other nations are dealing well with yesterday’s hawkish speech by Federal Reserve Chairman Jerome Powell, who predicted that US rates will rise faster than is currently anticipated.
Evidently, for this reason, the Bank of England chose to lessen the hawkishness of its monetary policy in the near future during its most recent meeting, appearing to have forgotten slightly about the nation’s double-digit inflation rate. Even though the economy narrowly averted recession in 2023, according to an estimate, one in four British households will be unable to pay their food and electricity bills.
According to a survey by the National Institute of Economic and Social Research, the UK economy may not decrease this year, which is a dramatic contrast to the more pessimistic predictions of the Bank of England and the International Monetary Fund. Recent months have seen improved economic prospects for the UK as a result of declining gas prices and calmer markets brought on by a return to conventional fiscal policy. However, economists predict that the UK will have one of the weakest rates of economic growth among advanced economies.
The cost-of-living crisis was also brought up by economists, who warned that middle-class households had seen a loss of approximately 4,000 pounds in yearly income during the previous year.
The NIESR forecasted a sluggish 0.2% economic growth this year, followed by GDP increases of 1% in 2024 and 1.6% in 2025. The NIESR cautioned that even the current decrease in growth rates for a million families will seem like a recession, despite the UK having every opportunity to avert a reduction in growth rates in all four quarters of 2023.
It is anticipated that around 7 million households, or one in every four, will not be able to fully cover their food and electricity costs from their income this year, up from one in every five households the year before. The fact that salaries are not keeping up with double-digit inflation makes it clear that British households are seeing a continuous deterioration in living conditions. But what will happen if the Bank of England now acts on its commitment to modify its hawkish stance and the government continues to raise wages, unwinding the inflationary spiral? We have no idea. According to NIESR, the Bank of England’s 2% objective for inflation won’t be reached until the second half of 2025.
Regarding the technical picture of the GBP/USD, trading shifted to the side channel following two days of collapse. Buyers must move above 1.2100 to regain the advantage. The only way to increase the likelihood of a rebound to the area of 1.2140, after which it will be feasible to discuss a more abrupt movement of the pound up to the area of 1.2200, is if this resistance fails to hold. After the bears seize control of 1.2040, it is feasible to discuss the pressure on the trading instrument. The GB/PUSD will be forced back to 1.1950 and 1.1880 as a result, hitting the bulls’ positions.
Regarding the EUR/USD’s technical picture, the pair is still under pressure, albeit not to a great extent. The European Central Bank’s ability to continue its aggressive monetary policy is no longer a given. The market must drop back below 1.0720 to halt the bear. If we maintain our position above this range, we can anticipate the trading instrument breaking through in the region of 1.0770. Above this point, you can quickly reach 1.0800 and update to 1.0830 in the near future. Only the collapse of the 1.0720 support will put more pressure on the pair and drive the EUR/USD to 1.0680, with the possibility of falling to a minimum of 1.0650 in the event of a decline.
The material has been provided by InstaForex Company – www.instaforex.com
The situation in the UK is deteriorating, while stock indices in other nations are dealing well with yesterday’s hawkish speech by Federal Reserve Chairman Jerome Powell, who predicted that US rates will rise faster than is currently anticipated.
Evidently, for this reason, the Bank of England chose to lessen the hawkishness of its monetary policy in the near future during its most recent meeting, appearing to have forgotten slightly about the nation’s double-digit inflation rate. Even though the economy narrowly averted recession in 2023, according to an estimate, one in four British households will be unable to pay their food and electricity bills.
According to a survey by the National Institute of Economic and Social Research, the UK economy may not decrease this year, which is a dramatic contrast to the more pessimistic predictions of the Bank of England and the International Monetary Fund. Recent months have seen improved economic prospects for the UK as a result of declining gas prices and calmer markets brought on by a return to conventional fiscal policy. However, economists predict that the UK will have one of the weakest rates of economic growth among advanced economies.
The cost-of-living crisis was also brought up by economists, who warned that middle-class households had seen a loss of approximately 4,000 pounds in yearly income during the previous year.
The NIESR forecasted a sluggish 0.2% economic growth this year, followed by GDP increases of 1% in 2024 and 1.6% in 2025. The NIESR cautioned that even the current decrease in growth rates for a million families will seem like a recession, despite the UK having every opportunity to avert a reduction in growth rates in all four quarters of 2023.
It is anticipated that around 7 million households, or one in every four, will not be able to fully cover their food and electricity costs from their income this year, up from one in every five households the year before. The fact that salaries are not keeping up with double-digit inflation makes it clear that British households are seeing a continuous deterioration in living conditions. But what will happen if the Bank of England now acts on its commitment to modify its hawkish stance and the government continues to raise wages, unwinding the inflationary spiral? We have no idea. According to NIESR, the Bank of England’s 2% objective for inflation won’t be reached until the second half of 2025.
Regarding the technical picture of the GBP/USD, trading shifted to the side channel following two days of collapse. Buyers must move above 1.2100 to regain the advantage. The only way to increase the likelihood of a rebound to the area of 1.2140, after which it will be feasible to discuss a more abrupt movement of the pound up to the area of 1.2200, is if this resistance fails to hold. After the bears seize control of 1.2040, it is feasible to discuss the pressure on the trading instrument. The GB/PUSD will be forced back to 1.1950 and 1.1880 as a result, hitting the bulls’ positions.
Regarding the EUR/USD’s technical picture, the pair is still under pressure, albeit not to a great extent. The European Central Bank’s ability to continue its aggressive monetary policy is no longer a given. The market must drop back below 1.0720 to halt the bear. If we maintain our position above this range, we can anticipate the trading instrument breaking through in the region of 1.0770. Above this point, you can quickly reach 1.0800 and update to 1.0830 in the near future. Only the collapse of the 1.0720 support will put more pressure on the pair and drive the EUR/USD to 1.0680, with the possibility of falling to a minimum of 1.0650 in the event of a decline.
The material has been provided by InstaForex Company – www.instaforex.com
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