- Markets are concerned about UK’s sluggish growth.
- The pound is vulnerable ahead of the new prime minister’s announcement.
- The pound is falling due to dollar strength.
Today’s GBP/USD outlook is bearish as the pair will likely extend its Thursday losses. On Thursday, the pound fell to its lowest level versus the dollar since March 2020 as investors sought shelter in the dollar and storm clouds began to gather over the British economy.
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The pound temporarily fell as low as $1.1499, a new low since March 2020 when COVID-19 struck markets, adding to August losses that made it the currency’s worst month since late 2016.
Concerns about the British economy’s sluggish growth as inflation surges into double digits contributed to the pound’s worst performance against the dollar since October 2016 and its roughly 15% decline this year.
The price it closed at on Wednesday was its lowest monthly finish since it dropped to an all-time low of roughly $1.05 in 1985. According to analysts, the pound has been particularly vulnerable due to a combination of inflationary pressures, economic weakness, and uncertainty about the policies of the new prime minister, who is expected to be announced on Monday.
A stronger dollar has made the issues facing the pound worse. At 109.74, the US dollar index, which compares the dollar to a basket of other currencies, was recently up 0.9%. It had previously climbed to 109.99, a fresh two-decade high.
“It’s not just sterling weakness – it’s a dollar strength story,” said Michael Hewson, chief markets analyst at CMC Markets. “Sterling has its problems, but they are not unique to it – high inflation, surging energy prices, and falling disposable incomes.”
GBP/USD key events today
GBP/USD investors will keep an eye on the US jobs report later today, which might cause market volatility. Analysts predict that while unemployment remained at 3.5%, 285,000 jobs were added last month.
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GBP/USD technical outlook: More pain below 1.15
Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI trading well below 50. The trend is bearish. There is support at the 1.15017 level as bears have paused, and the price is pulling back.
The price might retest the 1.16511 level as resistance before attempting a break below 1.15017.
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