Problems in the global economy will put pressure on GBPUSD

16 May 2023 190
Problems in the global economy will put pressure on GBPUSD

The GBPUSD pair is in an uptrend. The British pound looks stronger than other currencies against the dollar. At the same time, several factors can turn the pound around.

Workers across the UK are on strike, trying to maintain their purchasing power, which has declined due to high double-digit inflation. The British economy has lost another half a million working days because of this. The turmoil in the country will undermine the UK economy even more, which will weaken the national currency.

Continued key rate hikes in the U.S. are a real threat to all currencies except the dollar. Now, most investors are sure that the rate will decrease closer to the autumn.

According to Matt Simpson, senior market analyst at City Index, members of the regulator continue to disagree with plans to cut interest rates this year. On Monday, the Fed showed that interest rates would remain high and possibly even rise, considering the slow decline in inflation.

Pressure increases on the U.S. side as well.

On Tuesday, May 16, there will be a meeting between President Joe Biden and Republican leader Senate Kevin McCarthy. They will discuss the debt ceiling. Other members of Congress will also take part in the talks.

The issue of raising the U.S. national debt limit wasn’t resolved at the first meeting, because the differences between the parties were too great. The likelihood of progress in a new round of negotiations is also low. According to Secretary of the Treasury Janet Yellen, the U.S. debt ceiling might be increased by June 1, otherwise, the country will default.

The dollar index is rising amid problems with the U.S. debt ceiling. Following this trend, the American currency will continue to increase as the issue will be resolved closer to early June.

According to the technical analysis, the GBPUSD pair is going to break down the uptrend. In this case, the fall of the British pound may accelerate. The downside target will be the Fibonacci level of 0.5 of the entire growth wave, which corresponds to the price of 1.225. A stop-loss will be set when the local high is updated at 1.269.

Decrease in GBPUSD:

Take profit — 1.225

Stop-loss — 1.269

This content is for informational purposes only and is not intended to be investing advice.

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