The GBP/USD price sell-off accelerated in the overnight session as worries about the UK economy continued. The pair is trading at 1.3420, which was the lowest it has been since January this year. The price is about 5.5% below the highest level this year.
UK economy at risk
Economic data published on Thursday showed that the UK economic growth in the second quarter of the year was better than what most analysts were expecting. The country’s economy jumped by 5.5% in the second quarter, which was better than the median estimate of 4.8%. This increase was also better than the 1.6% contraction in the first quarter.
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According to the Office of the National Statistics (ONS), most parts of the UK economy grew in the second quarter as the country reopened. Business investments jumped by 23.6% in the second quarter while consumer spending and government investments rose as well.
However, there is a possibility that this good performance will be undone. The UK is facing a major power challenge, with several power providers going out of business. This happened as the wholesale prices of natural gas jumped to a record high.
At the same time, the country is facing a significant fuel shortage, with most fuel stations being closed. The shortage has been caused by a major shortage of drivers. To address this, the UK government said that it will ask the military to start delivering the fuel.
In October, the Federal Reserve and the Bank of England (BOE) will not meet. Therefore, the GBP/USD will react to economic numbers from the two countries. Among the most important will be numbers on inflation and employment. These numbers will provide signals about the state of the economic recovery.
The daily chart shows that the GBP/USD pair has been in a major sell-off in the past few weeks. Along the way, the pair has declined below the 100-day and 50-day moving average. This is a signal that bears are getting in control. The price also declined below the key support level at 1.3570, which was the lowest level in July.
Therefore, the GBP/USD pair will likely keep falling as bears target the next key support level at 1.3300 in October.
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