GBP: Following UK data and BOE pronouncement, GBP/USD continues to decline under 1.1050.

Oct 11, 2022
VOT Research Desk

Key News – Insights and Analysis

The Market Perspective:

In early European trading, GBP/USD is under pressure below 1.1050. In August, the UK ILO Unemployment Rate decreased slightly from 3.6% to 3.5%. BOE declared its intention to buy gilts with an index. The upside in cable is limited by risk aversion.

It’s challenging to find buyers for the British pound. The main levels to watch in the GBP/USD and EUR/GBP pairs, according to economists at MUFG Bank, are 1.10 and 0.88, respectively.

Pressure on the UK government to tighten fiscal policy is still present.

The likelihood of another significant decline in the value of the pound will rise if the government is unable to swiftly restore investor confidence.

Although UK bond yields rose at the beginning of this week, the pound held up reasonably well. However, this is unlikely to continue.

The EUR/GBP rate around 0.8800 and cable at 1.1000 are the next two crucial levels to pay attention to.

British Finance Minister Kwasi Kwarteng, who last month caused a bond market meltdown with unfunded tax cuts, tried to soothe investors by pushing forward a budget on Monday, according to Reuters. Announcement and naming a Treasury insider to run the department and, in addition, it was reported that “Kwarteng said he would reveal longer-term tax and spending plans and independent economic forecasts on Oct. 31, more than three weeks earlier than previously scheduled.

Under pressure to rebuild investor confidence. In addition, in an effort to appease investors, the BOE increased the maximum debt buyback size from 5 billion pounds to 10 billion pounds. However, this did not improve the market’s bias toward the British economy and political circumstances.

The Bank of England’s (BOE) recent efforts to maintain the British economy’s liquid stage and the BOE Governor Andrew Bailey’s speech at the Institute of International Finance Annual Membership Meeting in Washington make today’s UK employment data even more significant. The cable’s decline toward the record low it reached last month also stands out in today’s employment figures.

In the three months to August, the UK labor market report is expected to show that the average weekly earnings, including bonuses, increased to 5.9%, while wages without bonuses are expected to rise to 5.3%, up from priors of 5.5% and 5.2%.Furthermore, for the three months ending in August, the ILO Unemployment Rate is likely to remain unchanged at 3.6%.It is important to note that the Claimant Count Change figures are expected to decrease from 6.3K in the previous readouts to -11.4K.

The GBP/USD pair is likely to remain weaker in the future due to the hawkish Fed bets, risk aversion, and negative expectations from scheduled British data.

Technical Indicators

GBP/USD