GBP Key Points:
- Outlook: Bearish
- UK Inflation[1] Hit Double Digits. BoEExpects Inflation to Top Out at 13.3% in October.
- UK Consumer Confidence[2] Remains at All-Time Low.
- Markets Price in a Further 154bp Hike from the Bank of England in 2022.
How to Combine Fundamental and Technical Analysis[3]
GBP Week in Review
The GBP[4]did not enjoy its most productive week, losing ground against the Euro[5] and US Dollar[6] respectively. GBPUSD[7] declined from a weekly high of 1.2150 to trade at 1.18300, a drop of 300 odd pips and more crucially trading below the key psychological 1.20 level[8]. The losses came on the back of a continued rise in UK inflation[9], which puts the UK ahead of itsWestern European counterparts. Issues including Sterling weakness, Brexit-related supply chain issues, and soaring energy prices all contributed, with food prices rising 11.6% in four weeks. The cost of living crisis has begun affecting the debt of supermarket’s bonds with those issued by Asda, Iceland Foods, Tesco Plc and groceries delivery firm Ocado Group Plc falling on the back of Wednesday’s CPI print[10]. They were hit by concerns of rising food prices which made the biggest contribution to the month’s CPI increase.Going into the winter, Britons face soaring bills to heat their homes on top of foodprice rises, which in turn means borrowing costs for supermarkets are unlikely to improve anytime soon.
The Bank of England[11] (BoE) has seen the pressure ramp up following this past week’s data releases. The BoE must hike more than any other G10 country as investors have priced in 154 basis points of further hikes in 2022, more than is asked of
