empty
 
 

Forex Analysis & Reviews: GBPUSD dives into the abyss
time 22.08.2022 04:21 PM
time Relevance up to, 19.09.2022 12:00 PM

The first rise in inflation above 10% among the G7 countries on paper should have led to an increase in the yield of UK bonds, followed by a strengthening of the pound. However, everything turned out differently. Debt rates jumped up, but the sterling continued to fall. The lack of support from the debt obligations is a disturbing sign that allows us to say that the GBPUSD has collapsed into the abyss.

As a rule, expectations of an aggressive rate hike by the Central Bank have a positive effect on the exchange rate. You don't need to look far for an example: the US dollar has been appreciating rapidly for most of the year as the potential peak in the federal funds rate from CME derivatives increases. With the pound, a different picture is observed: after the data on the rise in inflation above 10%, the derivatives market considered that the repo rate would reach a maximum of 3.75% within six months. Expectations rose by 100 bps only in August, the yield of British bonds and its differential with US counterparts increased, but the GBPUSD pair continued to dive into the abyss.

Dynamics of GBPUSD and the yield differential of British and US bonds

This image is no longer relevant

Such divergences happen from time to time with the currencies of developing countries. Bond rates are rising as non-residents flee, weakening the currency amid a bleak economic outlook. The pound was previously called the Great British Peso GBP—due to the increased sensitivity to risk, investors had analogies with EM currencies.

The UK economy is extremely weak on its feet. Brexit and the energy crisis allow the Bank of England to predict a recession for five consecutive quarters, pushing investors away from the sterling.

Retail sales statistics serve as confirmation that GDP is going downhill. Their volumes in physical terms do not keep pace with the cost estimate. Inflation forces consumers to pay more for basic necessities, other goods and services, exacerbating the cost-of-living crisis and weighing heavily on the pound.

Dynamics of retail sales in Britain

This image is no longer relevant

This image is no longer relevant

There are always two currencies in any pair, and the fall of the GBPUSD would not have been so rapid if it were not for the return of investor interest in the US dollar. Expectations of Jerome Powell's hawkish rhetoric at the traditional Jackson Hole bankers' meeting in late August could deal a severe blow to US equities, dampen global risk appetite and boost demand for safe-haven assets.

Technically, there is a pronounced "bearish" trend on the GBPUSD daily chart. We hold short positions formed due to the 1-2-3 pattern from the level of 1.205 and periodically build up on pullbacks. The target of the downward movement is the level of 161.8% according to the AB=CD model. It is located at around 1.14.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2023
GBPUSD
Great Britain Pound vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade

InstaForex分析评论将让您充分了解市场趋势! 作为InstaForex的客户,您将获得大量的免费服务以实现有效的交易。

  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $1000 more!
    In February we raffle $1000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Turkey halted oil exports after major earthquake

Oil rebounded from lows as flows to a key Turkish terminal were suspended and part of a major European field was shut down. The US crude oil benchmark known

Andrey Shevchenko 22:56 2023-02-06 UTC+2

What conclusions can we draw after three meetings?

As a result, meetings of the three central banks took place last week. As analysts and economists have been formulating theories regarding interest rates and the rhetoric of central bank

Chin Zhao 18:25 2023-02-06 UTC+2

AUD/USD: Australian dollar awaits RBA verdict

During Tuesday's Asian trading session, the Reserve Bank of Australia will summarize the results of its first meeting of the year. This is by no means a passing event, although

Irina Manzenko 17:38 2023-02-06 UTC+2

AUD/USD: ahead of the RBA meeting

After rebounding last Thursday from a local 10-month low of 100.68, the dollar index (DXY) rose sharply on Friday. The U.S. labor statistics published on Friday contributed to the strengthening

Jurij Tolin 17:26 2023-02-06 UTC+2

Three reasons for euro's weakness

Who is to blame for a collapse in the EUR/USD pair? Christine Lagarde with her confusing comments? Surprisingly strong data on the US labor market for January? Or the Chinese

Marek Petkovich 14:53 2023-02-06 UTC+2

What does lower inflation mean for the dollar?

On August 25, 2022, participants from 34 countries gathered in Jackson Hole, Wyoming for the annual economic policy symposium hosted annually by the Federal Reserve Bank of Kansas City

Irina Yanina 11:45 2023-02-06 UTC+2

Wall Street has mixed views on gold

Investors waiting for an opportunity to enter the gold market found their chance on Friday, when the US released an unexpectedly strong employment report for January. The data said 517,000

Irina Yanina 10:23 2023-02-06 UTC+2

Pound: An ugly duckling in Forex

Numerous dovish signals from the Bank of England and a surprisingly strong U.S. jobs report for January dropped GBPUSD to a region of monthly lows. There is nothing worse

Marek Petkovich 09:41 2023-02-06 UTC+2

Markets halt rally due to strong US labor market data

Global markets were shocked once again as Friday's employment data in the US came markedly better than expected. The report said there is an increase of about 517,000 new jobs

Pati Gani 09:32 2023-02-06 UTC+2

GBP/USD. Overview for February 6, 2023

On Friday, the GBP/USD currency pair fell by around 200 points. As we've already mentioned, positive macroeconomic indicators from overseas led to the decline of the pound (or, rather

Paolo Greco 06:49 2023-02-06 UTC+2
现在无法通话?
提出您的问题,用 在线帮助.