Abstract:GBPUSD is trading towards key support ahead of the Bank of England rate decision. Will prices remain in an upward trend?
GBPUSD is trading towards key support ahead of the Bank of England rate decision. Will prices remain in an upward trend?
In a rollercoaster year, the latest actions from the Bank of England and other financial indicators imply a significant alteration in the UK's economic environment.
Let's look further into this. Predictions indicate the Bank of England will increase their rates to 5.25%, a percentage resembling those from the previous severe downturn. This measure reflects the Bank's vigorous approach to controlling inflation. However, it also piques interest and shines a spotlight on the fundamental economic issues lurking beneath the surface.
Inflation, the silent eroder of our purchasing power, continues to be a cause for concern. Current rates are hovering around a staggering 7.90%, which is significantly above the 3% target set by policymakers. For the everyday consumer, this translates to a higher cost of living. Prices for basic goods and services are surging, creating a strain on household budgets.
But its not just consumers feeling the pinch. Businesses, especially those dependent on imports, face squeezed profit margins. The dilemma? Either absorb the added costs, which can be debilitating, or transfer them to consumers and exacerbate the inflationary spiral.
Recession fears continue to grow with some key indicators being:
Rising Unemployment: A steadily increasing number of individuals find themselves without a job. With unemployment comes decreased consumer spending—a significant engine that powers the UK economy.
Business Bankruptcies Approach 2008 Highs: It‘s alarming to see businesses, from fledgling startups to established enterprises, grappling to stay afloat. The current bankruptcy rate, eerily reminiscent of the 2008 crisis, underscores the challenges businesses face in today’s economic climate.
GBPUSD
Looking at the chart we can see GBPUSD is in a strong weekly upward trend.
However, depending on the outcome of the announcement price could trade lower if it breaks down through the 1.2650 support.
If price holds, a move higher could form with prices heading towards 1.3000.
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Wednesday's major data releases and macroeconomic events are expected to cause volatility to increase after another day of erratic trading in the financial markets. The Spring Budget for the UK will be released, and January Retail Sales figures for January will be made available by Eurostat. ADP Employment Change for February and January JOLTS Job Openings will be discussed later in the session on the US economic docket.
Major currency pairings are still trading in familiar ranges early on Tuesday after the erratic trading on Monday. The US economic docket for the American session will include the factory orders data for January and the ISM Services PMI survey for February. Final updates to the February PMI for the US, Germany, the UK, and the EU will also be released by S&P.