GBP/USD Slumps to a 37-Year Low Ahead of the BoE

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GBP/USD – Prices, Charts and Analysis

  • GBP/USD is crumbling and there may be more to go.
  • BoE rate decision and the UK mini-budget are key next week.

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British retail sales figures released early in the session underlined a high street in trouble. Retail sales fell by 1.6% in August, continuing a downward trend from summer 2021 according to the Office for National Statistics. The ONS wrote “All major sectors (food shops, non-food shops, non-store retail and fuel) fell during the month, this last happened in July 2021, when all legal restrictions on hospitality were lifted”. Worryingly, sales volumes fell by 5.1% in the three months to August 2022, while sales values ​​increased by 5.6%, “reflecting an annual implied deflator (or implied price increase) of 10.7%”. Sterling fell sharply post-release with cable hitting a near four-decade low of 1.1350.

British Pound Forecast GBPUSD Slumps to a 37 Year Low Ahead of the BoE body Picture 1

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British Pound (GBP/USD) Remains Under Pressure as Key Central Bank Decisions Approach

As noted in the story above, the Bank of England (BoE) meets this Thursday to announce its latest monetary policy decision, with a 50 basis point rate already fully baked. Britain’s central bank is in an awkward position as they announce their decision a day before an emergency mini-budget is due to be delivered by Chancellor Kwasi Kwarteng. UK inflation (9.9%), once tipped to hit 20%+ according to some investment banks, will fall sharply if the UK government keeps its promise to cap consumer energy costs over the next two years. The BoE may curb any thoughts of a 75 basis point rate cut if they believe / know that the chancellor will effectively cool price pressures the next day. This may leave GBP/USD vulnerable to further selling, especially if the US Federal Reserve hikes by a minimum of 75 basis points on Wednesday.

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Looking at GBP/USD and clear support is difficult to identify, especially after hitting levels last seen in 1985. The chart setup remains negative and while a short-term recovery cannot be ruled out, cable looks lower.

GBP/USD Daily Rate – September 16, 2022

British Pound Forecast GBPUSD Slumps to a 37 Year Low Ahead of the BoE body Picture 3

Retail trader data shows that 82.47% of traders are net-long with the ratio of traders long to short at 4.70 to 1. The number of traders net-long is 8.29% higher than yesterday and 10 ,21% higher than last week, while the number of traders net-short is 20.58% lower than yesterday and 27.32% lower than last week.

We usually take a contrary view to crowd sentiment, and the fact that traders are net long suggests that GBP/USD prices will continue to fall. Traders are longer long than yesterday and last week, and the combination of current sentiment and recent changes gives us stronger GBP/USD bearish contra trade bias.




of customers is network long




of customers is net short

Change into

misses

Shorts

Oi

Every day 2% -10% 0%
Every week 4% -20% -1%

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



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