GBUSD Before The Fed, BoE & Mini-Budget

As if there wasn't enough to consider we now have Russian president Putin escalating the Ukraine war. This has seen GBPUSD trade to its first target for the blue wave (5). The next targets are 1.1040 and 1.0740. From a technical perspective, both targets are achievable. We also note that fifth waves can extend.

From a fundamental perspective, it is getting very dark for Sterling. US interest rates are feasibly being hiked by 0.75% today and the accompanying dot plot may well suggest that once rates reach their terminal high they will be held there through 2023. We now also have a Prime Minister who will enact plans that Citigroup labelled 'the biggest risk' to the UK economy. Figures released today show the Public Sector Borrowing Requirement at ￡11 billion for August, caused by higher interest rate payments. Former Bank of England (BoE) MPC member Danny Blanchflower, urges selling sterling today as he describes the government economic policy as 'in disarray'. Analysis by the Institute For Public Policy Research suggests that tax cuts will not stimulate the economy as in 2019 the UK had the lowest corporation tax and also the lowest rate of business investment of any G7 economy in 2019. In addition, I note that the Riksbank hiked interest rates by 1% yesterday and USDSEK gained 1%. The implication is that BoE rate hikes (possibly a 0.5% hike on Thursday) may continue not to support the pound.

So, the technical picture and the fundamental picture feasibly suggest lower GBPUSD. If price does bounce higher from the above targets be aware that we still have black wave ((4)) and black wave ((5)) to come. This opens up the possibility that a bounce to possibly 1.1700 or 1.1900 could be followed by another decline. With targets lower again. Let's see what happens.