The British pound has posted considerable gains in the Thursday session. GBP/USD is currently trading at 1.3476, up 0.36% on the day.
UK GDP revised upwards
There was positive news about the UK economy, as the final estimate for UK growth in Q3 was 5.5%, revised upwards from 4.8%. GDP is now about 3.3% below its pre-Covid level at the end of 2019, but the economy is clearly heading in the right direction.
The UK was hit by a petrol shortage across the country this week, due to a severe shortage in truck drivers. The lack of drivers has been exacerbated by the Covid pandemic and Brexit, which has caused many foreign workers to leave the UK and return to the European Union. The British Chamber of Commerce is warning that the fuel shortage could severely damage the economy, and the pound took a tumble earlier in the week, falling to its lowest level since mid-June.
After running roughshod over the majors for most of the week, the US dollar has taken a pause from its upswing on Thursday. The pound was hit hard, falling almost 2 percent during a mid-week slide. The dollar’s newfound strength can be attributed to the market’s concerns over inflation, which has been moving higher for months. What is new in the equation is that the Fed appears to have accepted that inflation isn’t going away anytime soon.
Perhaps the most important instance of the Fed’s take on inflation was evident from Fed Chair Jerome Powell’s congressional testimony on Tuesday. Powell grudgingly acknowledged that higher inflation may not be all that transient, saying that inflation “will likely remain so in coming months before moderating”.
Powell’s remarks were followed by more hawkish comments from Fed President Bullard, who said that the Fed might need two rate hikes in 2022 in order to combat inflation, and other members have urged the Fed to start tapering shortly. With a Fed taper practically a done deal, attention will shift to the timing of a rate hike, and further talk of a move in 2022 will be bullish for the US dollar.
GBP/USD Technical Analysis
With GBP/USD falling sharply on Wednesday, we start at lower levels:
- There are resistance lines at 1.3535 and 1.3603
- 1.3459 is a weak support line. Below, there is support at 1.3229
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