- GBP/USD price witnessed a massive bearish bias over the last few weeks.
- Analysts expect the UK to dip into recession in 2022.
- The bearish bias will likely send the sterling to parity.
GBP/USD price hovered around its lowest mark since 1985 as market players contemplated the Truss’ new government. The pair crashed towards the 1.1447 low, approximately 17% beneath this year’s highest market. Moreover, GBP-USD has surrendered 45% since its 2008 highest level,
Liz Truss New Government
The GBP/USD price maintained massive downsides within the last few months. That comes as concerns about the British economy persist. Analysts believe a steep recession could be impending as energy prices and the cost of business operations remain elevated.
Thus, the new prime minister Lizz Truss has massive work, especially with the surging energy prices. Analysts trust she will introduce a new strategy to help households deal with the soaring gas prices. The program might involve more than 200B pounds in gas price subsidies during the upcoming months. Though such a process might cool inflation in the short term, the effect on the nation’s debt will be disastrous.
The ONS (Office of National Statistics) revealed that the United Kingdom had more than 2.33 trillion in total debt. That equals around 99.6% of the overall gross domestic product. Nevertheless, the situation will persist, considering the rising trade deficit and budget.
The GBP-USD price plummeted as UK Gilt yields soared. The 10-year yield climbed to 3.06%, marking the highest mark in years. The increase primarily emerged due to the narrative that the new government would heighten administration spending & lower taxes. Economic stats indicated that the HPI (Halifax House Price Index) climbed to 0.4% from 0.1%. Price most from 11.8% to August’s 11.5% Y/Y. That signals more demand for houses.
The 2hr chart shows the GBP-USD exchange rate maintains massive downside trends within the last few weeks. It has dropped under the 1.1757 crucial support. That meant hitting the lowest mark of 14 July. The foothold also represented the Head-shoulders pattern’s neckline.
The pair dipped under the MAs 25d and 50d, welcoming chances of continued plunges, with sellers targeting the support of 1.1400. An action past 1.1560 resistance will annul the bearish standpoint. GBP/USD will likely dip into parity in the long run.