- The pound closed the week higher despite fiscal and monetary policy challenges.
- Kwasi Kwarteng resigned from office at Liz Truss’s request.
- Investors are awaiting Uk inflation data for clues on the next BoE rate hike.
The GBP/USD weekly forecast is bearish as fiscal and monetary policy conflict continues. Moreover, Kwarteng’s resignation ignites political woes.
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Ups and downs of GBP/USD
The pound unexpectedly posted a week of gains against important rivals As the UK coped with several challenges, including the persistent gap between monetary and fiscal policy. The pair dipped a bit on Thursday after US inflation came in higher than expected but soon after recovered.
At the IMF Annual Meetings in Washington, DC, Chancellor Kwarteng came under fire as Governor Bailey and the Bank of England (BoE) garnered support for their recent bond-buying initiative. The BoE’s bond-buying program, according to IMF Managing Director Kristalina Georgieva, was reasonable and addressed a danger to financial stability.
With Kwasi Kwarteng’s resignation on Friday, the ongoing disputes between BoE Governor Bailey and the government and the policy uncertainties came to a head. His six-week tenure as Chancellor was put to an end. Kwarteng acknowledged in writing that Prime Minister Truss had requested him to resign. This follows the chaos that has engulfed the UK markets since the Chancellor delivered his mini-budget address on September 23.
There is a chance that PM Truss could become the UK’s shortest-serving Prime Minister in history if the market continues to be volatile in the coming week.
Next week’s key events for GBP/USD
It will be a relatively quiet week for the British pound as there won’t be many significant news releases apart from the inflation report. This report will show the change in consumer goods and services prices and will inform the BoE of its next rate hike.
GBP/USD weekly technical forecast: Rebound losing steam at trendline resistance
The daily chart shows the price trading close to the 22-SMA and the RSI slightly below 50. Bulls have managed to push the price to the 22-SMA resistance but have failed to trade above it. When joined, the recent highs create a bearish trendline where the price is currently trading.
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The bulls are making another attempt to break above the 22-SMA, and they will need a lot more momentum as the 1.1485 level also offers resistance. If they fail, the price will likely fall to the 1.0949 support before retesting 1.0507.
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