Did you see the collapse of GBP today?
The new UK Chancellor of the Exchequer announced tax cuts last Friday to try to prop up the economy.
If you know anything about fundamental analysis, you know that tax cuts will negatively affect a currency and we now see these very ugly charts of GBP pairs with GBPUSD at record lows.
Traders are waiting to see if they should go long on GBP as, just down the street from the Chancellor, the Bank of England may have to raise Interest Rates dramatically to offset the fall in GBP and to fight the current inflation.
The weaker GBP has helped to lift the FTSE but be careful here.
The impending raise in Interest Rates should negatively affect UK equities.
The USD Index was over 114 at one point and we can see from our MT4 Profile of USD pairs that USD strength continues which is a huge problem for the global economy, especially emerging markets with USD debt.
The EUR rebounded a little (except against the USD of course) based on the Italian elections but this could be short-lived.
The JPY is starting to look a bit stronger (except against the USD) based on the Bank of Japan’s comments last week.
Speaking of Central Banks, investors will be watching for more clues today from Tokyo, and from Europe with 3 speeches by Christine Lagarde, and a speech from Jerome Powell.
This week will end with GDP figures from Canada, the United States, and the UK, which will move the markets if analysts don’t like the figures.
The current USD strength has pushed price action on Gold lower, below support into the mid-1600s, and we will look at this again tomorrow.
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