Weekly Outlook: GBP/USD

Another week of wild outcomes was seen in the GBP/USD currency pair over the most recent five days of trading, and it's probable that the currency pair hasn't seen the end of its run of crazy results just yet.

On October 4 and 5, the British pound to US dollar exchange rate hit a high of about 1.14950. It's possible that some merchants believe this has a lot to do with the "turnaround" that the Conservative administration has undergone under Liz Truss, but they could be mistaken. After receiving a significant amount of negative news on its proposed tax policy, the government of the United Kingdom decided to largely abandon the plan. In just a few short days, Prime Minister Liz Truss came to a different conclusion regarding what she had previously stated that she believed. Many different types of financial institutions were unhappy as a result of this.

The GBP/USD exchange rate is expected to be around 1.10900 when trading begins for the week. Before the weekend of the previous week, the GBP/USD exchange rate had been trading quite steadily near the 1.12100 ratio. Then, the employment data for the United States was released, and it was better than predicted; this caused the markets to turn once more.

This issue is being caused by poor leadership as well as unclear interest rates.

Not only did the government of the United Kingdom shift its stated economic policy at the beginning of the previous week, but financial institutions also began to speculate that the Federal Reserve of the United States would begin to soften its discourse about interest rates. Because of this, the GBP/USD pair rose. At the beginning of the previous week, indices of stock markets all over the world moved up, and there were some encouraging signs. On the other hand, remarks made by U.S. Federal Reserve officials toward the end of the week as well as employment data that was superior to what was anticipated led to a strengthening of the USD on Friday.

The fact that the price of crude oil went up last week and is now trading for more than $90.00 USD again "damaged" the assumption that inflation will suddenly reduce by a significant amount and caused it to become less likely.

The expectation that the Federal Reserve of the United States would raise interest rates by an additional 0.75 percentage point in November is becoming more and more common.

Inflation is still a problem, and the rise in the price of crude oil is a problem for the exchange rate between the pound and the dollar.

When they get to this point in the essay, technical traders may feel like yelling, but there is still one more significant problem to consider: inflation. There will not be a rapid reversal in the impact that inflation has had and will continue to have on the economies of the United Kingdom and the rest of the world.

Since the beginning of nearly 8 days of trading, there has been an increase in the price of crude oil. When there is a high rate of inflation, interest rates go up. At the beginning of the week prior, the GBP/USD exchange rate did indeed hit levels that were seen on September 21, but the rise was met with a lot of selling because fundamentals were making financial houses worried.

The upcoming trading week is shaping up to be one with a greater potential for volatility in terms of how people are feeling. The value of one pound relative to the other only fell before the weekend.