By ForexTime
First, let’s recap the volatile week that was for global financial markets!
Here’s the stunning price action that ensued after the lower-than-expected US inflation print that was released yesterday (Thursday, Nov 10th):
And even before the dust has fully settled from yesterday’s major moves, it’s already time we look ahead to next week, given the forward-looking nature of the markets.
The British Pound is set to be in particular focus amidst these potential market-moving economic data releases and events:
Monday, November 14
Free Reports:
Tuesday, November 15
Wednesday, November 16
Thursday, November 17
Friday, November 18
GBPUSD is about to head into this weekend on a 2-month high, having surged back above its 100-day simple moving average (SMA), thanks to the US dollar’s post-CPI tumble.
This currency pair, nicknamed “cable”, is now testing the mid-September high around 1.173, after building upon a series of higher-lows and higher-highs since careening towards parity.
Sterling’s resurgence of late has also been built on the optimism that the UK government will be on a better financial footing (or at least, it won’t be as bad as previously feared) under the new administration, following the removal of Liz Truss as Prime Minister along with her administration’s proposals for unfunded tax cuts.
However, such optimism would have to be vindicated when current UK Chancellor of the Exchequer, Jeremy Hunt, unveils the latest fiscal plans on Thursday.
Keep in mind that the UK government has a GBP 50 billion fiscal hole to fill.
Markets now expect Hunt to unveil some tax hikes as well as spending cuts, including a potential spending freeze after the UK’s next general election which may happen sometime in 2024.
In other words, this new UK government has to find ways to get more money into its coffers and avoid spending too much money, in order to shore up market confidence about the country’s financial health.
With this UK government’s credibility at stake, failure to shore up market confidence could see GBPUSD finding its way back to its 50-day SMA for support around the 1.133 region.
And of course, markets are still wary about the UK’s economic prospects, with the Bank of England just last week implying that the economy is currently in a recession and may continue contracting until mid-2024.
Against such a bleak outlook, the UK incoming jobs report and inflation data may offer scant relief. That should leave Hunt’s November 17th speech as the major catalyst for further GBPUSD gains, besides further declines in the US dollar.
At the time of writing, here are some forecasts for GBPUSD’s performance for the coming week (based on current levels):
Though to be fair, the options markets have become notably less bearish on GBPUSD’s immediate fortunes, with bearish one-week bets having halved since the start of November.
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