A Fundamental Analysis on GBPUSD

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Hello everyone, how are you all doing.

Today, I would like to throw a bit of light on some current vital economic happenings in US & UK which will help in fundamental bias for those into trading.

The inflation rate of US and UK have constantly been on a decrease and the Feds and BOE have been reluctant in hiking interest rate which is why liquidity is slowly moving from currencies to more riskier assets like Gold and cryptocurrencies and if you noticed, BTC is currently at $43k

When the Feds and BOE start putting an end to interest rate hike, BTC start going bullish cause that's often the alternative for investors.

Now let's continue...

Looking at the fundamentals surrounding GBP and USD, it's safe to say that the odd is currently in the favour of GBP and below are the reasons.

One: The UK inflation rate which is currently at 4.7% is still higher than that of US which is currently at 3.2% with both having a target of 2% before rate cut starts.

For this reason, investors bets is on GBP as they believe the BOE will take much longer than the FEDs before they start cutting rate due to the more stubborn UK inflation

(3.2% is much closer to 2% than 4.7% therefore it's only but logical to believe that US will reach that target faster than the UK.)

Rate cut for those that doesn't understand is simply the opposite of rate hike.

Interesting rate hike which is a tactics used in fighting inflation is simply the act of increasing interest rate in other to encourage people to hold the currency rather than spend it. When people hold the currency, they earn higher interest on it thus making them very reluctant in spending it and when people ain't spending much, the demands for goods and services tends to drop thus bringing down inflation because inflation as we know it is mostly caused by high demands on goods and services.

Now when inflation level has reached the target which is 2% in this case, the policy making body will start cutting down interest rate. Therefore, those that were once holding the currency merely because of the interest they earn will see no reason to keep holding thus making them sell or trade it for another.

Interest rate hike is often done to fight inflation while interest rate cut is often done to save the economy. This is because inflation and economic boom are only but two sides of a coin. When inflation is being fought, the economy suffers and when the economy is booming, the risk of inflation increases.

Also, as of last two weeks a $27 billion tax cut was announced by the UK government in their budget plan.

Tax cut often attracts investors which will lead to higher demand in the country currency.

That's all for now.

Thanks for reading