Weekly Outlook: GBP/USD

 

The GBP/USD saw another week of chaotic outcomes in the last five days of trading, and it is likely that the pair has not yet seen the end of chaotic results.

On the 4th and 5th of October, the GBP/USD touched a high of around 1.14950. Some traders may believe this has much to do with the "reversal" of the Conservative administration under Liz Truss, but they may be mistaken. The British government abandoned its proposed tax strategy after receiving a great deal of negative press coverage. In a matter of days, Prime Minister Liz Truss reversed her previous statements regarding her beliefs. This disappointed several financial institutions.

At the start of this week's trade, the GBP/USD will be near 1.10900. Before last week's weekend, the GBP/USD exchange rate was relatively stable near 1.12100. Then, a better-than-expected U.S. jobs report was released, which redirected the markets.

Ineffective management and imprecise interest rates are creating a headache.

Not only did the U.K. government shift its declared economic policy early last week, but financial institutions also began to believe that the U.S. Federal Reserve would begin to soften its language regarding interest rates. This caused the GBP/USD to rise. At the beginning of the week, global stock market indices rose and there were a few hints of optimism. However, statements made by U.S. Federal Reserve officials at the conclusion of the week and better-than-expected employment figures strengthened the USD on Friday.

The notion that inflation will suddenly decline significantly was "damaged" by the fact that the price of crude oil rose last week and is already trading for more than $90.00 USD.

People are becoming accustomed to the notion that the Federal Reserve will increase interest rates by 0.75 percent in November.

Inflation remains a concern, and the rise in crude oil prices has a negative impact on the GBP/USD exchange rate.

At this point, technical traders may want to scream while reading this post, but there is one more major issue: inflation. The impact of inflation on the economies of the United Kingdom and the rest of the world will not simply disappear.

The price of crude oil has increased for nearly eight trade days. When inflation is strong, interest rates are increased. The GBP/USD did hit levels reached on September 21 at the start of the previous week, but the advance was met with a great deal of selling since fundamentals were causing financial institutions to feel uneasy.

The following week of trading is likely to be marked by greater emotional volatility. The GBP/USD exchange rate only declined before the weekend.