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GBP/USD stays pressured on economic/energy worries, new PM eyed

Started by forex4you, Sep 05, 2022, 03:49 pm

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GBP/USD stays pressured on economic/energy worries, new PM eyed

<p style="" class="text-align-justify">The pair opened with a gap lower and is keeping below 1.1500 on the day, trading at fresh lows since the early days of the pandemic in March 2020. The news on  cutting gas flows to Europe is also biting at the UK as energy concerns continue to grow amid soaring electricity prices. I have maintained this sentiment for quite a while:</p><p style="" class="text-align-justify">"Considering that both central banks (Fed and BOE) already gave a formal message that we are in the second-half of the tightening cycle, the trade for cable is very much a case of 'who folds first'? The Fed or the BOE? In this instance, it looks very much like the latter. </p><p style="" class="text-align-justify">As such, the path of least resistance is for the pair to move lower - all else being equal. Now, with the dollar picking up steam across the board, the next test is 1.1800 1.1500 and the year's March 2020 lows near 1.1759 1.1409-45."</p><p style="" class="text-align-justify">I still find it tough to argue against that narrative, especially when fundamental developments continue to work against the region as we saw last Friday. In terms of domestic factors, we will see a new UK prime minister be announced later today.</p><p style="" class="text-align-justify">Liz Truss looks favourite to take to the helm and she has talked up a big game in trying to deal with the cost-of-living crisis as well as soaring energy prices in the UK. On the latter, she said she would consider energy bills freeze but I just don't see how any of her plans fit with trying to maintain "fiscal responsibility" at the same time. If it could be done, it would've been done. ITV's Robert Peston has a good thread on this <a href="https://twitter.com/Peston/status/1566703806825615362" target="_blank" rel="nofollow">here</a>.</p><p style="" class="text-align-justify">We've seen time and time again how UK politicians seem like they would bring about big change to the landscape, only to disappoint in the end. I don't think this will be any different. And I'm sure markets are also well prepared for that, so that does not bode well for the pound's prospects.</p><p style="" class="text-align-justify">/<a href="https://www.forexlive.com/terms/g/gbp/" target="_blank" id="3a5ab7c1-ff09-45ea-87d4-eea6613bb754_1" class="terms__main-term">GBP</a></p>

This article was written by Justin Low at www.forexlive.com.

Source: GBP/USD stays pressured on economic/energy worries, new PM eyed

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