What happened with the Pound in 2022!
The GBPUSD had so much potential heading into 2022, as markets anticipated some possibility of the UK navigating through the Brexit ordeal.
The BoE was one of the first central banks to increase rates, BUT YET, we saw the Pound getting pounded down, from the 1.35 price area down to the HISTORIC low of 1.036, with huge speculation that the GBPUSD could even reach PARITY.
In addition to what we already know (you can read more about it in the links below)
The decline in the GBPUSD was also driven by SIGNIFICANT political chaos. Prime Minister Boris Johnson was replaced in September by Liz Truss, who was replaced in October by Rishi Sunak (A change of 3 Prime Ministers in the space of 2 months)
On 23rd September, UK Finance Minister Kwasi looked to boost the country's economic growth by introducing a series of tax cuts, totaling 45 billion pounds by 2026-27.
However, the market was spooked by the scale of the fiscal giveaway and the immediate reaction was to sell UK govt bonds.
While the FTSE 100 fell to its lowest level since March, the ground gave way on the GBPUSD as it crashed from the 1.1255 price level down to the 1.0360 historical low (23rd to 26th September)
Further decline in the GBPUSD was saved by a quick intervention from the BoE as it pledged an unlimited long-dated bond-buying program to restore stability and orderly market conditions.
Fortunately for the UK, the rapid change in the Prime Minister, BoE intervention, U-turn in tax policy, and introduction of a new austerity package has had some positive impact on the GBPUSD.
In November, the new Finance Minister Jeremy Hunt released a series of spending cuts and tax rises in an attempt to plug the hole in the public finances.
The GBPUSD has recovered strongly from the 1.0360 price level in September to reach the 1.25 price area in December.
However, the UK pound is not out of the woods yet! Inflation in the UK still stands at 10.7% with interest rates at 3.50%. AND there is dissent within the BoE as the most recent rate decision votes indicated that 2 members voted to hold rates at 3.00% (7 voted to hike).
Could the BoE risk a pivot at this point? Is there enough momentum in the current slowdown of inflation growth, that it could reach the BoE's target level?
Stay Tuned for the 2023 outlook!
The BoE was one of the first central banks to increase rates, BUT YET, we saw the Pound getting pounded down, from the 1.35 price area down to the HISTORIC low of 1.036, with huge speculation that the GBPUSD could even reach PARITY.
In addition to what we already know (you can read more about it in the links below)
- DXY strength
Russian-Ukraine conflict
EURUSD reaching parity
The decline in the GBPUSD was also driven by SIGNIFICANT political chaos. Prime Minister Boris Johnson was replaced in September by Liz Truss, who was replaced in October by Rishi Sunak (A change of 3 Prime Ministers in the space of 2 months)
On 23rd September, UK Finance Minister Kwasi looked to boost the country's economic growth by introducing a series of tax cuts, totaling 45 billion pounds by 2026-27.
However, the market was spooked by the scale of the fiscal giveaway and the immediate reaction was to sell UK govt bonds.
While the FTSE 100 fell to its lowest level since March, the ground gave way on the GBPUSD as it crashed from the 1.1255 price level down to the 1.0360 historical low (23rd to 26th September)
Further decline in the GBPUSD was saved by a quick intervention from the BoE as it pledged an unlimited long-dated bond-buying program to restore stability and orderly market conditions.
Fortunately for the UK, the rapid change in the Prime Minister, BoE intervention, U-turn in tax policy, and introduction of a new austerity package has had some positive impact on the GBPUSD.
In November, the new Finance Minister Jeremy Hunt released a series of spending cuts and tax rises in an attempt to plug the hole in the public finances.
The GBPUSD has recovered strongly from the 1.0360 price level in September to reach the 1.25 price area in December.
However, the UK pound is not out of the woods yet! Inflation in the UK still stands at 10.7% with interest rates at 3.50%. AND there is dissent within the BoE as the most recent rate decision votes indicated that 2 members voted to hold rates at 3.00% (7 voted to hike).
Could the BoE risk a pivot at this point? Is there enough momentum in the current slowdown of inflation growth, that it could reach the BoE's target level?
Stay Tuned for the 2023 outlook!
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