In a positive sign for the burden on household energy bills, Prime Minister Truss announced on Thursday a support package to limit energy bills; after the announcement, market expectations for headline inflation levels in the coming months have eased. But some economists worry that this may cause some damage to the British economy next year.
British Prime Minister Truss announced a series of support plans for energy bills on Thursday, saying that the British government will limit household energy bills to 2,500 pounds per year, which is expected to save a single family 1,000 pounds a year in energy bills. Truss also said it would temporarily remove the green tax from consumer energy bills to further ease the burden on consumers. It is reported that this plan is expected to curb inflation and boost the British economy, but its containment of inflation will not exceed 5 percentage points. Truss also said it would issue oil and gas exploration licenses, with more than 100 expected to be issued.
Queen Elizabeth II of the United Kingdom passed away on Thursday (September 8) local time, and the British government’s response measures are proceeding in an orderly manner. British Prime Minister Truss said on Friday that the previously announced energy bill plan will still be implemented as planned during the mourning period, and the original plan of “starting in October and lasting two years” will remain unchanged. As far as the economic calendar is concerned, the inflation survey, which was scheduled to be released at 16:30 pm GMT+8 on Friday, has been postponed, and the Bank of England’s September interest rate decision will also be postponed until September 22 GMT+8 19pm Click to publish.
While the energy bailout is expected to dampen inflation, headwinds to the UK’s economic outlook remain risky, which will further dampen sterling. GBP/USD’s near-term upside outlook may be short-lived given the Fed’s hawkish outlook.
GBP/USD 4-hour chart
Chart source: Tradingview, drawn by Ashley
GBP/USD once fell to 1.1405 on Wednesday, and the bulls and bears fought fiercely this week, so the weekly closing level was closely watched by investors.
Looking at the GBP/USD 4-hour chart, the pair may have found a mid-term bottom on Wednesday. Considering that the downtrend (C) that started at the end of February this year may end, the future upward movement of GBP/USD will be the focus of the author’s attention. According to the guidance of wave theory, the sub-wave of wave (C) is a 5-wave structure. If wave (C) just ends at the low of 1.1405 this Wednesday, then the fourth wave of its sub-waves is in the whole wave (C) decline. 38.2% Fibonacci retracement level. Therefore, if GBP/USD gains enough momentum in the coming week, it could signal a resumption of the uptrend in the short to medium term. (Ashley)
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