Prices, Charts, and Analysis of GBP/USD
- Since 1995, the most significant increase has been a 50bp rise.
- S&P Global/CIPS Services PMI fell short of initial projections.
- The US Dollar gets a small bid.
To combat the rising inflation, the Bank of England is anticipated to raise interest rates for the sixth straight meeting on Thursday. The Bank Rate is expected to climb by 50 basis points, which would be the most significant increase since 1995. The UK borrowing rate would reach 1.75 percent, a 14-year high, with a 50bp increase. The Bank of England has said they anticipate double-digit UK inflation by the end of Q3 and the beginning of Q4. According to a recent National Institute of Economic and Social Research (NIESR) analysis, UK inflation would reach 11%. The country’s central bank would need to raise the Bank Rate to 3% to curb price pressures.
According to the most recent S&P Global/CIPS services PMI, UK services sector activity slowed to its lowest rate in 17 months due to “inflationary pressures and the cost-of-living squeeze,” which “resulted in heightened economic uncertainty,” which was a disappointment compared to initial expectations. “Any slowdown in inflationary pressures can’t come soon enough for service providers,” wrote Tim Moore, S&P Global Market Intelligence economics director. “Many firms report growing customer resistance to price hikes and a subsequent decline in demand as higher energy, fuel, and staff costs are passed on to customers.”
GBP/USD DAILY PRICE CHART – AUGUST 3, 2022
Tuesday saw a minor increase in the value of the US dollar due to US House Representative Nancy Pelosi’s arrival in Taiwan, which infuriated China and prompted threats of reprisal. The highest elected person to visit Taiwan in almost 25 years, Ms. Pelosi, said that America’s commitment to upholding democracy in Taiwan “remains ironclad.” China has responded to Ms. Pelosi’s visit with a slew of economic restrictions and has started military exercises in the area. Currently trading at approximately 105.85, the US dollar basket dropped as low as 104.75 on Monday.
In anticipation of Thursday’s policy announcement, GBP/USD is now in a holding pattern. Although the move lacked absolute conviction, a slightly firmer USD and a flat GBP have combined to drive the GBPUSD down below 1.2200. The outcome of tomorrow’s decision and the subsequent MPC analysis will determine Sterling’s short-term future.
According to statistics from retail traders, 2.20 for every short trader means that 68.77 percent of traders are net long. While the number of net-long traders has increased by 6.18 percent from yesterday and 8.35 percent from the previous week, the number of traders who are net-short has decreased by 12.59 percent from yesterday and by 0.25 percent from the previous week.
Since we usually don’t agree with the consensus, the fact that traders are net-long signals that the price of GBP/USD may continue to decline. While positioning is less net-long than last week, it is less net-long than yesterday. We have a mixed GBP/USD trading bias due to the current mood and previous adjustments.