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British Pound (GBP/USD) Weakens Further Ahead of BoE Decision

British Pound (GBP/USD) Weakens Further Ahead of BoE Decision

British Pound (GBP/USD) Analysis and Charts

  • Bank of England is set to leave interest rates unchanged.
  • Federal Reserve decision and the US Jobs Report are also due next week.

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The British Pound has struggled against a range of currencies over the past few weeks as investors continue to take a dim view of the UK economy. The Bank of England left rates unchanged at its last meeting and is fully expected to do the same on Thursday next week as the central bank tries to help boost the ailing economy while at the same fighting inflation. UK GDP is estimated to have increased by 0.2% in Q2 following upwardly revised growth of 0.3% in Q1.

Office for National Statistics – GDP

In comparison the US economy looks in rude health. The first look at US Q3 q/q data showed the economy expanding by 4.9% after a 2.1% expansion in the prior quarter. This strength has enabled the US central bank to leave interest rates at their elevated levels, and warn markets that they may stay there for longer than originally expected, helping in the Fed’s fight against inflation. This difference between the UK and US economy, and monetary policy, has seen the US dollar strengthen against the British Pound.

In addition to the BoE and Fed meetings next week, there is also the latest US Jobs Report (NFP) released next Friday. This release is capable of adding a burst of volatility into the market ahead of the weekend, and with prior numbers seemingly revised every month, US dollar traders need to watch the release carefully.

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GBP/USD remains under pressure with the October 4th multi-month low of 1.2038 at risk of being breached. The pair have dropped over 10 big figures since the mid-July high of 1.3143 driven mainly by US dollar strength. With the UK economy still struggling it will likely be the US dollar that determines Sterling’s fate in the weeks ahead. A break of 1.2038 would leave 1.2000 vulnerable before 1.1804 comes into play.

GBP/USD Daily Price Chart

See How GBP/USD Traders are Currently Positioned and What it Means

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily -5% -4% -5%
Weekly 3% -7% 0%

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What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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