Sterling Weekly fundamental Forecast: Mixed
Source: TradingView, prepared by Richard Snow[2]
Inflation and the UK’s Disposable Income Challenges
While the pound has done alright against weaker currencies like the euro[3] and yen[4], it has continued the long-term downtrend since June 2021 when looking at GBP/USD[5]. Understandably, the dollar has been phenomenally strong from a fundamental point of view and more so recently due to its safe-haven[6] appeal amid the ongoing invasion of Ukraine. Nevertheless, cable appears to be stuck near the lower bound of the descending channel around the psychological level[7] of 1.3000 with no clear bullish catalyst.
Customize and filter live economic data via our DaliyFX economic calendar[8]
Sterling continues to struggle as UK battles rising inflation and a cost of living crisis resulting from higher prices (mainly energy costs but includes higher NI contributions) which squeezes household disposable income. If households are left with less money after paying bills, that equates to less spending and less economic activity, locally.
Speculative Institutions Remain Bearish on Sterling
The Commodity Futures Trading Commission (CFTC) issues a weekly report on the aggregate positioning of large institutions (excludes treasury desks that typically hedge exposure) and hedge funds. Data from Tuesday the 29th of March reveals that traders remain net-short GBP/USD[9] as can be seen by the diverging light blue (shorts) and orange (longs) lines. New data is expected later on Friday.
Commitment of Traders (CoT) Report, CFTC
