The economic outlook across the globe is very disturbing. China is suffering from Covid-19 troubles, and the U.S. economy struggles to resolve key issues such as interest rate hikes and high inflation.
On the flip side, U. K’s economic crisis is becoming more severe. The price stability of the GBP is daunting because of the energy crisis, poor GDP growth, and high inflation.
This weak economic performance has made the Pound vulnerable in the open market.
On the other hand, the U.S. data and 200-day SMA infringement show that the Pound can go on a further low.
However, despite all these negativities, British Pound was a few points higher than the USD by the end of the trading day on Friday.
The recently published report has shown the poor GDP growth of the U.K. This means that economic growth for the U.K. in 2022 was negative. Now all the eyes are on the fourth quarter’s financial performance.
However, the fourth quarter report will be published next year. Experts are already predicting that another economic recession is on its way to hitting the markets.
This means that U. K’s economic performance is perfectly placed to experience two consecutive financial quarters of negative growth. This will make GBP further volatile, and GBP might decline further.
What are the Upcoming Economic Troubles of the U.K?
Economic experts are worried that if the current scenario is prolonged, people will have to bear the sufficient decline in per capita income.
Moreover, inflation will rise further. In such an economic circumstance situation will become nearly impossible for the Bank of England to keep the interest rate low.
As the country is already facing an energy crisis, the current economic outlook indicates that unemployment and job creations are likely to be the most prolific upcoming challenges.
The newly elected Prime Minister of the U.K is running out of time and tricks. As of this writing, the government still needs to take concrete action to address the current turmoil.
What Do the Technical Indicators of GBP/USD Show?
The price chart of GBP/USD shows that the pair is currently slightly below the 1200 mark. The future indicators are favorable for the USD. However, GBP presently has no strong footing and high volatile.
Experts are expecting short bullish trends in the first week of 2023. If GBP somehow manages to exploit these bullish runs, it might achieve the much-needed stability for a very shorter period.
If this happens, the GBP/USD pair can hold the new resistance level at around 1900 psychological level.
The market may experience extreme price volatility if bears bring bulls down even after the start of the New Year. The expectations of upcoming bullish trends are solely sentimental.
The market outcomes and the technical indicators both favor strong bears. But the presence of bulls is reliant upon the rumors.
Chances are very high that British Pound might decline moving forward. The upcoming key resistance levels are 1.2407 and 1.2154, and the forthcoming key level of support for GBP is 200-day SMA, 1.2000, and 1.1900.
Investors are Also Bearish on British Pound (GBP)
The data published on various online platforms shows that investors are also bearish on the future price of GBP. As a result, 52% of the investors have taken a long position on GBP.
The reason that investors are long on the British Pound is that they want to avoid the volatility risk. But investors might only be able to hold the British Pound for a little longer due to the increased selling pressure.
As of now, fiat currencies across the globe are suffering from high volatility. So, investors must avoid investing in GBP at the very moment and wait for economic indicators to be more stable.
Rather than investing in GBP, investment in Japanese Yen is a better option. Recently JPY has gained strength as its price has retracted a bit.