British PM delays stimulus, pound outlook bumpy

Sterling's path ahead is fraught with risks, with Prime Minister Sunak's government delaying further stimulus and possibly tightening its policy stance amid a very weak economy. Britain has entered a recession that could last for two years, longer than the one during the 2008-09 financial crisis.

The U.S. Commodity Futures Trading Commission CFTC foreign exchange business position report shows that as of 2022-11-01 in the week (hand) GBP long positions decreased by 5936 lots to 183,210 lots; the reduction of future market confidence and energy and inflation risks is expected to promote the pound America went higher. GBP/USD is expected to rise to 1.20 and 1.27 by the end of 2023 and 2024, respectively.

At 20:00 Beijing time on Thursday (November 3), the Bank of England raised interest rates by 75 basis points to 3% as scheduled, the largest single rate hike since 1989, but two members of the committee disagreed with such a sharp rate hike . The Bank of England has raised interest rates eight times in a row since December last year, the highest level since November 2008.

Uncertainty surrounding the outlook for retail energy prices in the UK has somewhat eased following further government intervention. If the outlook points to rising inflationary pressures, the Monetary Policy Committee will respond forcefully if necessary. Inflation peaked at around 11% in Q4 (September forecast: peak “just below 11%” in October 2022), CPI expected to be 2.2% in Q4 2024 and 0.8% in Q4 2025 .

Bank of England Chief Economist Peel: The message from the Monetary Policy Committee is "the need to raise interest rates." Inflation risks are skewed to the upside. More rate hikes to come. Market pricing prior to October 25 was too strong. Raising rates to the 5.25% that the market had expected would be excessive tightening. If we keep the bank rate at 3%, inflation will remain high for 2 years, and the risk of inflation rises. UK interest rates are unlikely to rise as the market expects.

HSBC said the pound is nearing the end of its recent downtrend, nearing long-term lows. Sterling appears to be finding some balance after a period of ups and downs, HSBC analysis briefing said; looking ahead, sterling is unlikely to rise sharply and may fall further from now; still see sterling in the coming months Some mild weakness, but the GBP/USD forecast for the end of 2022 remains at 1.10 and does not see GBP/USD falling towards or below parity.

UBS Global Wealth Management: After the Fed, Bank of England interest rate decisions, the outlook for the pound remains bleak. The outlook for sterling remains weak after the Bank of England took a more cautious stance than the Federal Reserve this week, UBS Global Wealth Report said. Sterling has rebounded briefly against the dollar after several U-turns in UK fiscal policy. GBP/USD sees "downside" risk as the Bank of England says the market is overpriced in its terminal rate, while the Federal Reserve says its terminal rate may be higher than previously expected.

GBP/USD daily candlestick chart shows:

After a short-term shock and upward movement, it encountered resistance and retreated. The market bear momentum began to emerge, but the downward momentum was lacking. The top suppression focused on the vicinity of 1.18972, the low support was focused on the vicinity of 1.10495, the MACD indicator was hovering above the 0 axis, and the RSI indicator was at 50 equilibrium. Vibration near the line, as shown in the figure:

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