Monthly pound fundamental forecast
Forex exchange rates depend not only on central banks' monetary policy but also on other factors. A typical example is the 15% GBPUSD decline since the beginning of the year, as a result of which the pair fell to 37-year lows. The main drivers of the GBPUSD collapse were the faster pace of the Fed's monetary tightening over the BoE, the state of the UK economy, and political risks. Will the situation change in the near future?
The twin budget and current account deficits have never been a good sign for the currency. The negative balance of UK trade in goods and services increased to £27bn in April-June, almost an all-time high since records began in 1997. Even exports to the EU, which peaked at £17.4bn in June, didn't help. All because of the energy crisis. The rapid rise in gas prices leads to a significant rise in the cost of imports, increases the costs of UK companies, reduces their competitiveness, and slows down GDP. What is happening is a transfer of income from the consumer of raw materials to its producer. Thus, GBPUSD bulls are in a losing position.
UK foreign trade dynamics
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