Currency depreciation continues, the market downgrades Bank of England rate hike expectations

GBP/USD pared gains to 0.19%, after rising as much as 0.3% to 1.2500; GBP/USD gained 1.94% for the week, its biggest weekly gain since December 2020, as the latest economic data suggested the market may not need a sharp Lowered expectations for a rate hike by the Bank of England. But it should be noted that the Fed is still firmly focused on fighting inflation, which means that its current rapid tightening policy is still in automatic operation. This position is more hawkish than the Bank of England, indicating that the pound has upside potential limited.

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The U.S. Commodity Futures Trading Commission CFTC foreign exchange business position report shows that as of the week of 2022-05-17 (hand) GBP/USD long positions decreased by 8980 lots to 201647 hand positions, GBP/USD rose 1.81% to 1.2474, will record The biggest weekly gain since December 2020. Strong economic data from the U.K. suggested that markets may not need to further scale back expectations for a rate hike by the Bank of England.

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On the 19th, Reuters published an analysis article on the current devaluation of the pound, titled "Pound Sterling: The 'Sick Man' of the Currency World". According to a report by the Office for National Statistics on the 18th, the UK's consumer price index (CPI) in April increased by as much as 9% year-on-year, which not only refreshed the UK's inflation rate record since it was recorded in 1982, but also depreciated the UK currency more than the United States and the United States. The European Union has become the country with the fastest rising prices of all developed economies. The Reuters report believes that rising energy costs and food prices are the main reasons for the surge in British inflation.

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The report believes that despite similar difficulties in the United Kingdom and many countries affected by factors such as the epidemic, there are several unique driving factors for the devaluation of the pound. One is that Brexit has led to higher import and export trade costs with other EU countries, pushing up domestic prices. The second is that UK taxes have driven up production costs in many industries already hit by the pandemic.

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In addition, Reuters believes that the conflict between Russia and Ukraine has made it difficult for the United Kingdom to maintain its originally low energy prices, which is also one of the reasons for pushing up British prices and causing the pound to depreciate. Since the above-mentioned factors affecting the value of the pound may not be resolved in the short term, many investment institutions believe that it is "not a wise move" to hold the pound at present.

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British Foreign Secretary Liz Truss confirmed on Tuesday that the government plans to pass legislation to amend the Northern Ireland Protocol in the coming weeks. The protocol is part of a post-Brexit trade deal that requires inspections of some goods entering Northern Ireland from the rest of the UK. His remarks could heighten the risk of retaliation by Brussels and could spark a trade conflict with the world's largest trade bloc. After the announcement was negative for the pound, the pound remained stable without further decline.

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Data this week showed that the UK unemployment rate hit a near 48-year low in the first three months of 2022; UK inflation surged at an annual rate of 9% in April; retail sales unexpectedly rose in April. Money markets are now pricing in another 25 basis points of interest rate hikes at the Bank of England's June meeting and a cumulative 125 basis points by the end of the year.

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The Bank of England will need to raise interest rates further to ensure expectations of high inflation do not become entrenched, even as it is driven by geopolitical conflicts, soaring energy prices and supply chain bottlenecks beyond the Bank of England's control, Bank of England chief economist Huw Pill said on Friday driven by other factors.

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British business secretary Quatten: At present, fighting inflation is a "major challenge", British petrol retailers have not cut prices, opposed to windfall profits tax on energy companies, companies say windfall profits tax will hinder investment, energy companies want to see financial stability , without intending to quantify how much businesses should spend, Chancellor of the Exchequer Sunak made it clear that all options are on the table, and that BP, Royal Dutch Shell and others are aware of the need to invest in the energy sector.

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Britain lifts export restrictions on Turkish defense industrial products; on May 20, local time, Demir, director of the Defense Industry Committee of the Turkish Presidential Office, said that the export restrictions imposed by the United Kingdom on Turkey's defense industrial products have been lifted. Regarding the recent visit to the UK with a delegation, DeMille said that the delegation had friendly exchanges with officials from the British Ministry of Defence and Commerce, as well as some defense industry companies. In order to further enhance the defense industrial relationship between the two countries, the United Kingdom has fulfilled its previous commitment to take positive steps on the issue of restrictions imposed on some Turkish defense industrial products.

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The bearish momentum continued to oscillate and fall near the lower track of the Bollinger Bands indicator. After reaching the node near 1.21555, the low level began to reverse and oscillate upwards, and the node near the middle track of the Bollinger Bands indicator began to organize. The short-term bullish momentum continued to move upwards. The Bollinger Bands indicator showed After closing the trend, it began to move. The top suppression focused on the vicinity of 1.27049, the low-level support focused on the vicinity of 1.21555, and the nodes near 1.23975. The MACD indicator remained in the bearish area and continued to move upwards. , as shown in the figure: