- Workers in the UK are striking over the high cost of living.
- Rising inflation could cause a further slowdown in the UK economy.
- In January, it’s projected that the UK’s domestic energy price cap will rise to more than 4,200 pounds annually.
Today’s GBP/USD price analysis is bearish as the price extends losses. The pound fell against the dollar on Monday to its lowest level since mid-July. Rising energy prices and summer strikes brought attention to the UK’s cost of living crisis and heightened concerns of a further economic slowdown.
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The pound saw its most significant weekly decline versus the dollar since September 2020 on Friday amid concerns about Britain’s rising inflation and ailing economy.
“The weak UK growth outlook continues to weigh on the pound. News that Ofgem is set to announce on Friday that UK average annual household energy bills are likely to rise to more than 3,500 pounds ($4,128.60) reinforces the headwinds facing consumers,” said Jane Foley, head of FX strategy at Rabobank in London.
The UK’s domestic energy price ceiling is anticipated to increase to over 4,200 pounds per year in January, up 230% from the previous year, due to rising wholesale costs and modifications to the cap’s calculation.
Foley noted that pay-related strikes at Felixstowe, the largest container port in the UK, brought attention to concerns related to the cost of living crisis and posed a threat to exacerbate supply chain problems for UK businesses.
GBP/USD key events today
The UK will release purchasing manager’s index data for the manufacturing and services sectors, which are expected to drop. On the other hand, the US will release new home sales data. New Home Sales reflect the annualized volume of newly constructed single-family homes sold over the previous month.
GBP/USD technical price analysis: Bears aiming below 1.17618
Looking at the 4-hour chart, we see the price trading far below the 30-SMA, indicating that the trend is bearish. The RSI also supports bearish momentum as it trades below 50. However, it is trading in the oversold region, meaning bears are close to their limit.
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At this point, bulls might return to take the price higher and retest resistance at 1.19257 or the 30-SMA. The price might also break below if the current candle closes well below 1.17618.
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Saqib Iqbal
