Weekly Outlook: GBP/USD

In the last five days of trading, the GBP/USD had another week of chaotic results, and it's likely that the currency pair hasn't seen the end of chaotic results yet.

The GBP/USD hit a high of almost 1.14950 on October 4 and 5. Some traders might think this has a lot to do with the "turnaround" of the Conservative government under Liz Truss, but they might be wrong. When the proposed tax plan of the U.K. government got a lot of bad press, the government pretty much gave up on it. Prime Minister Liz Truss changed her mind about what she said she believed in just a few days. Many financial institutions were not happy about this.

The GBP/USD exchange rate will be around 1.10900 when the week starts. Before last week's weekend, the GBP/USD was almost always trading calmly near the 1.12100 ratio. The markets turned again when the U.S. jobs report came out and was better than expected.

The situation is a mess because of bad leadership and unclear interest rates.

Early last week, not only did the U.K. government change its stated economic policy, but financial houses also started to think that the U.S. Federal Reserve would start to talk less about interest rates. The GBP/USD went up because of this. At the beginning of last week, stock market indices around the world went up, and there were some signs of hope. But comments from U.S. Federal Reserve officials at the end of the week and better-than-expected job data made the USD stronger on Friday.

The idea that inflation will suddenly drop a lot was "hurt" by the fact that the price of Crude Oil went up last week and is now trading for over $90.00 USD again.

People are getting used to the idea that the U.S. Federal Reserve will raise interest rates by 0.75 percent more in November.

Still a problem is inflation, and the GBP/USD exchange rate is hurt by the rise in crude oil prices.

At this point in the article, technical traders may want to scream, but there is one more big problem: inflation. The effects of inflation on the economies of the U.K. and the rest of the world won't go away quickly.

Since almost 8 days ago, the price of crude oil has been going up. When prices go up, interest rates go up. At the beginning of last week, the GBP/USD did reach levels seen on September 21, but there was a lot of selling because fundamentals were making financial houses nervous.

People's feelings about trading look like they will be more unstable in the coming week. Before the weekend, the GBP/USD rates only went down.

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