There is a likelihood that the GBP/USD pair will keep falling today as the market reflects on the new sanctions and the possibility of higher inflation rate in Europe and the US.
Bearish view
- Sell the GBP/USD and set a take-profit at 1.3250..
- Add a stop-loss at 1.344.
- Timeline: 1 day.
Bullish view
- Set a buy-stop at 1.3400 and a take-profit at 1.3500.
- Add a stop-loss at 1.3300.
The GBP/USD pair retreated slightly on Monday morning as investors assessed the worsening crisis in Europe and the actions by western governments on Russia. The pair is trading at 1.3350, which is significantly lower than the highest point last week.
UK Joins in Excluding Russia from SWIFT
The UK has taking a prominent role in ensuring that Russia is punished for its invasion of Ukraine. Already, the UK has placed sanctions on leading Russian oligarchs and politicians in the Duma.
And during the weekend, the government joined other western parties like the US and the European Union to limit some Russian banks to the SWIFT network. It also took part in placing limitations on the Russian central bank.
These sanctions will have an immediate and long-term impacts on the UK. The most recent data showed that the two countries did business worth over 15 billion pounds in the fourth-quarter of 2021.
Total exports to Russia from the UK were valued at over 4.3 billions while Russia exported goods worth over 11 billion to the UK. Most of the goods and services that Russia exports to the UK is in the energy sector.
The pair is also reacting to the latest US inflation data. On Friday, the US published the latest personal consumer expenditure (PCE) data. The numbers revealed that the US inflation rose by 5.2% from a year ago. That increase was higher than the median estimate of 5.1% and was the highest level since 1983.
Including the more volatile food and energy prices, the PCE increased by 6.1%, which was also the highest point since 1982.
Sadly, the ongoing crisis means that inflation will remain at elevated levels. For one, the price of crude oil has already jumped to $100 and gas prices are soaring.
GBP/USD Forecast
The GBP/USD pair declined sharply as the invasion of Ukraine started. The pair is trading at 1.3350, which is significantly lower than this month’s high of 1.3640. On the four-hour chart, the pair retreated on Monday as investors focused on the sanctions by western countries. It has moved below the 25-day and 50-day moving averages and formed what looks like a bearish flag pattern.
Therefore, there is a likelihood that the GBP/USD pair will keep falling today as the market reflects on the new sanctions and the possibility of higher inflation rate in Europe and the US. The next reference point to watch will be at 1.3270.
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