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10.12.202213:43 Forex Analysis & Reviews: GBP/USD: by the end of the week

Exchange Rates 10.12.2022 analysis

After falling during Friday's Asian trading session, the dollar then rose at the beginning of the European session. Thursday's story seems to be repeating itself.

After hitting an intraday local low of 104.44, the DXY futures were back on the rise, climbing to the proverbial 105.00 mark. The dollar and its DXY index remain under pressure despite dollar bulls' attempts to regain control.

There are 3 weeks left till New Year, but the situation in the financial markets is not becoming less tense, though some big players of the financial market have already summed up the results of the year and are gradually closing positions, balancing their investment portfolios and going out of the market. Due to this, the volume of trades has already started to decline. However, this does not mean that volatility is also declining. Next week we will have another powerful breakthrough in this respect: besides the release of important reports, 4 major world central banks (USA, Switzerland, UK and eurozone) will announce their decisions on monetary policies.

British reports will open the upcoming week (at the beginning of the European trading session): the British National Statistics Office will release data on industrial production and GDP for October. This report shows the aggregate economic data and will have a strong impact on the Bank of England's monetary policy decision (the BoE is set to meet on Thursday, December 15). GDP growth means an improvement in economic conditions, which makes it possible (with a corresponding increase in inflation) to tighten monetary policy, which, in turn, usually has a positive effect on the quotes of the national currency.

Monthly GDP data (as opposed to quarterly reports) does not affect the pound so much. Nevertheless, traders, who follow the dynamics of its quotes, are likely to pay attention to this report.

Indicators in the manufacturing industry and industrial production in the UK are expected to fall, and GDP growth will decrease, which should have a negative impact on the pound, including in the GBP/USD pair.

In the meantime, GBP/USD has been on an uptrend for the third consecutive month, having recovered from a deep fall in August and September. Back then, as we remember, the ill-conceived policy of the then Prime Minister Lisa Truss' cabinet to reduce taxes and increase spending led to a sharp drop in the market for British government bonds and the pound. Economists said that the British financial system was hours away from a grand collapse or just a collapse in general. The BoE had to intervene to prevent the pound and the British stock market from plunging even further: in late September, according to Bloomberg, the central bank purchased British government bonds (conventional gilts) with a residual maturity of more than 20 years in the secondary market from September 28, and promised to buy long-term government bonds worth another 65 billion pounds. "The purchases will be carried out on whatever scale is necessary," the BoE said at the time.

However, GBP/USD has also been rising in the last 3 months and amid the weakening U.S. dollar. The DXY index reached a local high of 114.74 in September (since June of 2002), but then started falling in November by more than 5.0%. And the DXY has fallen another 1.1% since early December, to its current high of 104.81. And so far, as we noted at the beginning of this article, the dollar and its DXY index remain under pressure.

Exchange Rates 10.12.2022 analysis

As for GBP/USD, the pair was trading near 1.2240, bullish in the medium-term (above the support levels of 1.2110, 1.1930 and 1.1875) when this article was written. The uptrend is still present for the time being: steady growth to the area above the long-term resistance level of 1.2250.

*تعینات کیا مراد ہے مارکیٹ کے تجزیات یہاں ارسال کیے جاتے ہیں جس کا مقصد آپ کی بیداری بڑھانا ہے، لیکن تجارت کرنے کے لئے ہدایات دینا نہیں.

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