- The Pound remains within recent ranges, unable to breach the 1.2075 resistance.
- Concerns about China and Ukraine are weighing on the GDP.
- GBP/USD on track to its worst year since Brexit.
The Pound remains unable to capitalize on a softer US Dollar on the last trading day of the year. The pair has failed to break above 1.2075 and keeps moving within a 60-pip range on both sides of 1.2050 for the second consecutive day.
Concerns about China and Ukraine and BoE’s dovishness weigh on the GBP
Concerns about the fast expansion of coronavirus cases in China have kept risk appetite in check over the last half of the week. Reports from independent sources talking about 9,000 daily deaths contrast with the information by official institutions reporting 5,000 new infections and only one death on Friday.
These contradictions have prompted several countries to impose mandatory COVID-19 tests on all arrivals from China and are casting doubts about the strong economic recovery in the Asian dragon, triggered by the end of the Zero-COVID policy.
Beyond that, the Russian army keeps heavily shelling Kyiv and other Ukrainian cities for the second consecutive day after the Kremlin’s refusal to accept Zelenski’s peace plan. The rising tension in the eastern-European country is weighing on risk appetite further.
In the UK, the grim economic perspectives forced the Bank of England to lift its foot from the rate-hike pedal in December. This was taken by the markets as a signal of a slowdown in the tightening cycle, which has added negative pressure on the GBP
Political uncertainty and a weak economy have crushed the Pound in 2022
The Pound Sterling is set to close the year with a decline of about 11% in its worst yearly performance since 2016 when the Brexit party won the referendum by a tiny margin.
The political uncertainty on Boris Jonson’s last days and Liz Truss’ tax fiasco battered the GBP earlier this year. The pair however bounced up steadily, cutting losses by about 20% as the market welcomed the election of Rishi Sunak as the new Prime Minister in late October.
Against this backdrop, economic indicators have confirmed the strong impact of Brexit. UK post-pandemic recovery has lagged behind the world’s major economies, with the GDP still 0.4% below the last quarter of 2019 and price inflation out of control, which is turning UK citizens‘ cost of living crisis into a nightmare and posing a serious challenge to the Bank of England.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD fluctuates near 1.0700 after US data
EUR/USD stays in a consolidation phase at around 1.0700 in the American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold keeps consolidating ahead of US first-tier figures
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.