The Pound dropped to its 18-month lows. Overview for 14.03.2022

GBPUSD continues falling and updating its local lows.

The British Pound is getting weaker against the USD on Monday. The current quote for the instrument is 1.3051.

What is happening? First of all, GBPUSD is under significant pressure that comes from the “greenback, which is in demand as a “safe haven” asset during turbulent periods. Secondly, investors are very concerned with what is going on in the British economy. Geopolitical tensions and uncertainty prevent the Bank of England from tightening its monetary policy despite the inflation surge. The consequences of interruptions in deliveries, which were not completely eliminated after the pandemic, are back and may become even more complicated. 

It will be very difficult for the BoE to disregard the increasing CPI. The regulator might eventually decide to taper or close the QE programme and tighten its monetary policy. However, it’s very hard to predict what exactly the BoE might do: as a rule, the regulator sticks to a rather conservative policy but the times have changed. 

The British regulator is scheduled to meet this week. Most likely, the meeting will be as neutral as possible. At the same time, the benchmark interest rate is expected to go from 0.50% to 0.75%. As usual, all nuances will be in the regulator’s comments – one should learn them thoroughly after the meeting. 

As of now, the Pound remains rather weak and there are no reasons for this trend to reverse.