GBP / USD – rates, charts and analysis
- Mann of the Bank of England warns of imported inflation.
- UK headline inflation is expected to rise further.
The British pound is moving gently higher in early trade despite a series of negatives hanging over the Pound. Wednesday’s inflation statement is expected to show annual headline inflation (May) touching 9.1%, a new four-decade high, with some market commentators seeing an uptick in the reading. The Bank of England recently warned that inflation could reach 11% this year. In addition to mounting price pressures, UK growth is slowing, leading to inevitable screams of recession. And while the UK may not be alone in this predicament, the British Pound remains under pressure and will likely continue to do so. And just to top it off, the UK today faces its biggest rail strike in three decades with more industrial strikes and disruption expected over the coming weeks.
On Monday, Bank of England Monetary Policy Committee member Catherine Mann said the central bank should raise interest rates aggressively to try to stem sterling’s weakness. Ms Mann said the Bank of England needed “more aggressive policy action”, adding that this would reduce the already high domestic inflation being boosted by imported inflation due to the weak sterling. Ms. Mann was one of three policymakers who voted for a 50 basis point rate hike at the Bank of England’s policy meeting last week.
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GBP/USD is currently trading just below 1.2300, marginally higher during the session mainly due to the US dollar drifting lower. The British pound has had a rough time lately – the pair traded at 1.1935 last Tuesday – and while the latest rally will be welcomed by the pound bulls, the move to the top looks shaky and unlikely to break above the resistance area either side of 1.2400, in the meantime. Short term at least. All eyes on Wednesday’s UK inflation reading and any subsequent comment from the Bank of England.
GBP/USD daily price chart – June 21, 2022
Retailer data show 73.65% of traders are net long with the ratio of long to short traders at 2.79 to 1. The number of long traders is up 3.34% from yesterday and down by 7.36% from last week, while the number of short traders is up 11.37% from yesterday and 17.98% higher than last week.
We usually take a conflicting view with crowd sentiment, and the fact that traders are holding suggests that GBP/USD prices may continue to fall. However, traders have less net long positions than yesterday and compared to last week. Recent changes in sentiment warn that the current GBP/USD price trend may reverse upwards soon despite the fact that traders are still net.
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