Latest GBP News: Learn How the GBP Is Doing in the Forex Market￼
Several factors impact the price of GBP and the performance of GBP pairs. Discover the latest GBP news and the events that are driving the price.
Latest GBP News
The Great British Pound (GBP) is one of the forex market’s most traded currencies and one of the world’s reserve currencies. Forex traders analyse many currency pairs daily, using platforms such as TradingView UK to get the correct entries and exits as they trade. News about global or national events frequently impacts the prices of forex pairs, in the short term or long term, and is often critical to a successful analysis. From political events to economic factors, a country’s currency reacts to the impact of events on investors’ confidence. This article explores the latest news about the UK and the global economy that affects the market value of the GBP.
Pound rallies as Liz Truss resigns
The UK is currently battling harsh economic conditions that have worsened over the last six months. Inflation and energy concerns have driven the GBP to new lows. A change in government, starting with the resignation of former Prime Minister Boris Johnson and the crowning of a new king, seemed to be the spark the UK economy needed. Prime Minister Liz Truss was sworn in after a close election saw her emerge victorious, but her short tenure has done little to improve the economy. Specific tax policies reduced investors’ confidence in the GBP, but a possible reversal is in the works, thanks to her resignation, which she announced on Thursday. Many traders took up a bullish position on the GBP pairs before her announcement as they predicted a rally. The GBP did not disappoint: it rose sharply, rallying to $1.13 against the USD, before falling to $1.12.
Fiscal policy reversal rallies GBP
Liz Truss and former Chancellor of the Exchequer, Kwasi Kwarteng, announced a tax cut policy that saw the GBP hit lower prices against the USD and an increase in UK government bond yields. The effect also caused a reduction in the demand for the GBP, but the new Chancellor of the Exchequer, Jeremy Hunt, pushed the policy aside, causing the GBP to rally by 1 point for the first time in many weeks. The Bank of England started an emergency buying of government bonds after the market unravelled following the tax cut announcements. The BoE has now ended the action following a gradual return to normalcy. The GBP went up 1.54% following the announcement, reaching a new high in October. Market sentiments are firmly confident that the GBP will regain momentum.
GBP hits new one-month high
The GBP hit a new month-high price on October 13, reaching $1.1440 for the first time since October 5. The price remained above 1.15 until October 18, when it fell. The increase came from a slight buying pressure caused by the bullish traders seeking to leverage the short-term effect of the Prime Minister’s announcement. The price fell as the market absorbed the impact, but investors’ confidence in the GBP depends on the election’s outcome. As the UK prepares for a new PM, the major question is whether it is enough to stem the fall of the GBP and kickstart the much-needed recovery. The economic policies will see the GBP respond in kind in the coming weeks.
UK inflation hits new 40-year high
The worsening economy saw UK inflation hit a new 40-year high, reaching 10.1% for the first time since 1982. The cost of living is increasing, due to rising food and energy prices, and with winter fast approaching, energy and housing concerns are triggering massive inflation. The UK government is helping to manage the situation by freezing energy bills at £2,500 for an average household. But the BoE warns that inflation will peak at a level just under 11%, and may hold steady for some time. Economic experts predict a UK recession in the final months of 2022. Although the long-term focus is to reestablish the GBP’s dominance, the short-term action is to roll out policies to prevent uncontrolled inflation.
GBP interest rates may not rise above 5%
In reaction to rising inflation rates, the BoE has hinted that its monetary policies won’t affect interest rates heavily. In August, the BoE increased the interest rate to 1.75% and then to 2.25 in September to increase demand for the GBP. The move worked: the GBP gained in the market and reached a new month-high price. But soaring inflation and worsening economic conditions have led to talk that the BoE may increase interest rates again. Investors are expectant as they see potential bullish positions upon announcement. But the BoE looks unlikely to raise interest rates, even as mortgage rates hit new 14-year highs, according to the Deputy Governor of the BoE, Ben Broadbent, who was speaking at an event on October 20, where he expressed doubts that the UK would increase the interest rate to over 5% to reduce inflation.
Despite enduring a rough start to Q4, analysts believe that the GBP has more turbulent times ahead before any significant price improvement. Since it fell to an all-time low of $1.03 against the USD on September 26, the GBP has regained some strength to reach above 1.15 before falling again. The GBP has a significant support level at 1.10, which, if broken, could go down to 1.05. The 1.1.5 mark, on the other hand, represents an important resistance level. If the GBP breaks through the latter, it could signal a rally. The GBP is rallying against the USD, which has fallen against a basket of major currencies. Whether or not it sustains that movement depends on the economic policies of the next Prime Minister.