The Bank of England can no longer support the pound
August 16, 2023 3:28 amVideo
Latest News
- The dollar is in control April 19, 2024
- Analysis of the GBP/USD pair on April 18, 2024 April 18, 2024
- Analysis for EUR/USD pair on April 18th. Dull ending to a dull week April 18, 2024
- USD/JPY: Simple trading tips for novice traders on April 18th (US session) April 18, 2024
- GBP/USD: Simple trading tips for novice traders on April 18th (US session) April 18, 2024
- EUR/USD: Simple trading tips for novice traders on April 18th (US session) April 18, 2024
- GBP/USD: trading plan for the US session on April 18th (analysis of morning deals) April 18, 2024
- Trading Signals for EUR/USD for April 18-20, 2024: buy above 1.0641 (21 SMA – 2/8 Murray) April 18, 2024
- Bitcoin slides ahead of halving event – Crypto News April 18, 2024
- Trading Signals for BITCOIN (BTC/USD) for April 18-20, 2024: buy above $62,500 or $63,037 (4/8 Murray – rebound) April 18, 2024
- GBP/USD. April 18th. Andrew Bailey did not clarify the situation on QE April 18, 2024
- Trading Signals for GOLD (XAU/USD) for April 18-20, 2024: buy above $2,375 (6/8 Murray – 21 SMA) April 18, 2024
- Technical Analysis – Netflix stock moves within narrow range ahead of earnings April 18, 2024
- Technical Analysis – GBPUSD tries to recoup some losses April 18, 2024
- USD/JPY in crisis April 18, 2024
- EUR/USD: trading plan for US session on April 18. EUR gets stuck at 1.0686 April 18, 2024
- Fed to keep policy tight for longer than markets view April 18, 2024
- Technical Analysis – BTCUSD drops to 6-week low as halving looms April 18, 2024
- Midweek Technical Look – EURUSD, US 500, WTI April 18, 2024
- Technical Analysis – AUDJPY pulls back but stays in uptrend April 18, 2024
The Bank of England has raised interest rates fourteen times in a row, but has failed to make significant progress in the fight against high inflation. Moreover, recent reports, some of which were released on Tuesday, show a deterioration in various economic processes in the UK. Let’s discuss this in more detail.
Inflation in the UK initially rose more sharply than in the US or EU. The market probably believed that if inflation in the UK was higher, the BoE would raise interest rates longer and stronger. To some extent, this is true since the rate has risen more than at the European Central Bank. But at the same time, the Federal Reserve’s rate is even higher and has every chance of remaining so until both central banks begin easing policies. As we can see, the pound sterling has no advantage in this regard.
Unemployment in the UK has increased over the past year from 3.5% to 4.2%. In other words, it is indeed growing in the UK, unlike in the US, where the indicator remains near its 50-year lows. Wage growth rates have increased from 5.8% to 8.2% in the last five months alone. And the faster wages grow, the higher the chances of a new acceleration in inflation. The last five quarters of the UK’s GDP ended with the following results: +0.1%, -0.1%, +0.1%, +0.1%, +0.2%. Let’s compare them with the last five quarters in the US: -0.6%, +3.2%, +2.6%, +2.0%, +2.4%. The difference, as they say, is obvious.
If the BoE’s rate were now at 3% or 4%, meaning there was room for further rate hikes, the pound sterling could continue to rise based on everything mentioned above. However, the UK interest rate has risen to 5.25%, which is the highest level since 2008. Its peak was at 5.75% in 2008. Assuming that the rate will not exceed this value, the BoE will raise the rate two more times at most.
Theoretically, the central bank could increase it to 6.5-7%, which is clearly required by the current inflation rate, but I don’t believe it yet, and the market is unlikely to put such a scenario into prices. Therefore, monetary tightening in the UK is coming to an end, as it is in the US. America has almost achieved its target, and its economy has hardly suffered. The UK cannot boast of the same. I believe that demand for the pound will only decrease.
Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still consider targets around 1.0500-1.0600 quite realistic, and with these targets in mind, I recommend selling the instrument. The a-b-c structure looks complete and convincing, therefore, it’s done. Therefore, I continue to advise selling the instrument with targets located around the 1.0836 mark and even lower. I believe that we will continue to see a bearish trend.
The wave pattern of the GBP/USD pair suggests a decline. You could have opened short positions a few weeks ago, as I advised, and now traders can close them. The pair has reached the 1.2620 mark. There’s a possibility that the current downward wave could end if it is wave d. In this case, wave 5 could start from the current levels. However, in my opinion, we are currently witnessing the construction of a corrective wave within a new bearish trend segment. If that’s the case, the instrument will not rise much above the 1.2840 mark, and then the construction of a new downward wave will begin.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: