GBP/USD Price Forecast – Calm Before the Storm for Pound
GBP/USD Price Forecast: Calm Before the Storm for Pound
In light of the UK’s fiscal policy u-turn, the pound has been bouncing back against the dollar. This has come after a long period of losses, as the UK resorted to tax hikes and spending cuts to address the government’s deficit problem.
Aside from this, the Bank of England has also raised interest rates for the sixth time in a row since September. However, growth has stalled and the central bank fears the economy could fall into recession.
The Pound has been bouncing back and forth between 1.30 and 1.2269 recently, but has not managed to break above the 1.2121 resistance level that was established last week. This is a crucial psychological mark and will be watched carefully this week, as the market looks for a more sustainable uptrend.
Looking ahead to Monday, the pound should be in focus as the UK releases its inflation figures. This will show whether the country’s annual inflation rate has softened in recent months. A rise in inflation will pressure the BoE to raise interest rates further, which would slow down economic growth.
Traders will also be watching the wage growth figures from the UK for December. If wages grow faster than expected, it will add to pressure on the Bank of England and keep the currency under pressure.
The Dollar has been on a strong trend against the Sterling Pound over the past year. This has been driven by hawkish Fed bets and safe-haven flows.
A quick look at the underlying trend suggests that the USD could keep on its winning streak against the pound for some time to come. The Dollar has been gaining ground in the market on multiple factors, including its safe-haven status and a combination of a weaker Euro, which is a major rival to the British pound.
Looking ahead to 2022, the Pound may struggle to find a bottom against the USD as the Fed and the BoE continue to diverge in their monetary policy strategies. In addition, the UK’s economic outlook is worse than it is in the US