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Mon, Oct 03, 2022

GBPUSD is moving in an Expanding Channel and Box Pattern, Market has rebounded from the Horizontal Support area of the Pattern.

Where Is The GBPUSD Today

The GBPUSD currency pair is struggling to stay above support levels following the release of the UK’s Retail Sales data. Looking at each of the time frames, it is evident that this major pair is currently entering being super unstable as a result of the unexpected reveal that the retail sales were higher than expected. This caused the pair to be slightly bullish as well.

GBPUSD H1 Time Frame Analysis Market is moving in an Ascending triangle pattern and the market has Fallen from the horizontal resistance area of the pattern

GBPUSD is moving in an Ascending triangle pattern and the market has Fallen from the horizontal resistance area of the pattern.

We can see that every now and then, the pair seems to recover slightly before falling back under hot waters. Just today, we have seen the GBPUSD pair fall as low as 1.246 but has since slightly recovered and is now teasing around the 1.247 region. At the moment, it seems as though this pair may continue to try and trend upwards. However, it is very unlikely that this will actually occur.

The UK Retail Sales

In a surprising turn of events, we found out early on Friday that the UK retail sales actually increased by 1.4% month over month despite the increase of inflation. The UK has been suffering from a really high inflation rate for the past couple of months just like many other countries around the world. And due to this reason we expected the UK retail sales to drop significantly because people wouldn’t be spending as much because they actually wouldn’t have enough money to do so. Several basic necessities had increased in value especially petrol making it really hard for people to fill up their cars with gas. The biggest thing that has been really hard for the people of UK was paying rent. Rent had increased triple the amount which it was before inflation started increasing and people have just not been able to pay it because it’s just really expensive.

UK Retail sales came at a lower level than expected

David Muir, Senior Economist at Moody’s Analytics reveals his thoughts on this current situation. He states, “With price pressure set to persist through the rest of the year, households are likely to have to pare back discretionary spending, putting the brakes on economic growth. For the Bank of England, the challenge will be to walk the fine line between bringing inflation down while not tipping the economy into recession.” Economists at RTE also reveal, “UK retail sales volumes rose 1.4% month on month after a 1.2% drop in March, the Office for National Statistics said. Economists polled by Reuters had expected a 0.2% monthly fall. UK retail sales in the three months to April fell 0.3%, after a 0.7% drop in March. Compared with a year ago, sales volumes were 4.9% lower, marking the biggest annual drop since January 2021. Earlier, Britain’s longest-running gauge of consumer confidence, the GfK survey, fell to its lowest since records began in 1974. British consumers were hit last month by a double whammy of surging in household energy costs and higher taxes, and data published this week showed inflation hit a 40-year high of 9%.”

BOE Segal-Knowles Speech

Early on Thursday, Christina Segal-Knowles from the BOE held a speech at the European Association of CCP Clearing Houses (EACH) in Brussels where she talked about the central clearing system of the Bank of England and how it has helped manage the risks of financial contracts. She reveals how incentivizing central clearing was a key process of global financial reforms.

GBPUSD Monthly

GBPUSD is moving in the Descending triangle pattern and the market has Rebounded from the Horizontal support area of the Pattern.

CCPs were essential to make efforts to move away from the normal network of insufficiently marginal contracts that helped to turn US mortgages into a global financial meltdown. She further mentions that so far, there have been two economic events that have really tested the system. One if the global pandemic and the other is the war between Ukraine and Russia. However, these events have really helped in making the central clearing stronger.

UK GDP data shows underweight progress as expected 1.5 per cent by an economist but 0.8 came

In her speech, Christina reveals, “In early 2020, the COVID-19 pandemic sparked a ‘flight to safety’ by investors, with considerable volatility across asset classes, including government bonds. We saw the biggest two-day price moves for some cleared products in the past decade. CCPs in this period functioned as intended. Very significant and sudden changes in asset prices did not lead to counterparty credit risk – actual or anticipated. There were no major clearing member defaults during the pandemic, so clearing was not tested to the limit. But there was no panic about counterparty credit risk, no ructions in the interest rate swap markets. UK CCPs were able to provide clearing services without disruption. Again, we saw big margin calls at CCPs. Losses (and corresponding gains) on derivative positions spiked across February and March 2022, primarily in markets experiencing the largest shocks. The margin exchanged to reflect those losses and gains (VM) across UK CCPs in Q1 2022 were larger than those observed during the 2020 Covid crisis.”

BOE Pill Speech

Early on Friday, Huw Pill who is the Chief Economist of the Bank of England held a speech where he discussed the current inflation situation in the country and what needs to be done in order to resolve this issue. This speech was much needed after we found out just a couple of days ago that the UK’s CPI data showed an inflation rate of 9% which hasn’t previously been seen in about 50 years. It is expected that inflation will soon enter the double digits if no one does anything about it very soon.

UK CPI data shows missed expectations in September month as 2.9 versus 3 expected

In his speech, BOE Pill reveals, “As has been emphasized in recent Bank communication, the MPC seeks to follow the narrow path between these two risks, while returning inflation to its 2% target in a sustainable manner. The weight attached to the risks on either side of this narrow path will vary across people and through time, evolving as new economic data are published and analyzed. The recent discussion of UK monetary policy – and the absence of unanimity in MPC votes – should be understood in that light. But, in my view, as a general rule monetary policy responses to macroeconomic developments need to be measured and persistent if they are to be effective. Such an approach ensures that changes in Bank Rate are transmitted along the yield curve to the longer-term rates more relevant to spending and pricing decisions, while also allowing learning about the impact of policy decisions ahead of making irretrievable mistakes in one direction or the other.”


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