GBPUSD is moving in the Descending channel and the market has Fallen from the Lower high area of the channel.
Where Is GBPUSD Today
The GBPUSD charts are quite unstable today as a result of the release of a support package to Ukraine by the UK and the speeches by both the Feds and the BOE.
GBPUSD is moving in the Descending channel and the market has rebounded from the lower low area of the channel.
As a result of these releases, the GBPUSD pair faced a drop in its value and is now teasing around the 1.550 region. We may continue to see this pair be volatile throughout the day.
Feds Waller Speech
Christopher Waller who is a Feds governor recently held a speech at the Rocky Mountain Economic Summit Global Interdependence Center where he discussed monetary policies and the price stability in the economy. He reveals, “We must be focused on reducing inflation because, despite a lot of talk about recession lately, the evidence from the labor market indicates the economy is on track, while inflation continues to be far too high. It must be our focus because high inflation is the biggest challenge to sustaining our employment goal, and the greatest burden for individuals and families, especially lower- and moderate-income households that dedicate a larger share of their spending to necessities. Inflation has to be our focus, every meeting and every day, because the spending and pricing decisions people and businesses make every day depend on their expectations of future inflation, which in turn depend on whether they believe the Fed is sufficiently committed to its inflation target.”
He further states, “And, the data that point to some slowing don’t convince me that it will damage the labor market. Measures of manufacturing activity and indicators of future activity, such as the purchasing manager’s index, have moderated but are still in expansionary territory. Rather than a recession, the softening data seem consistent with the pandemic-related transition underway since last year among consumers from spending on goods to spending on services. And we should expect that as policy tightening feeds through the economy it will dampen household and business spending decisions—that is the objective of our policy tightening. Past experience has shown that job creation and the unemployment rate are timely indicators of a recession, more timely than quarterly GDP. I will watch all the data carefully, but the factors I just cited, along with the evident strength across different measures of the labor market, leave me feeling fairly confident that the U.S. economy did not enter a recession in the first half of 2022 and that the economic expansion will continue.”
GBPUSD is moving in the Descending channel and the market has reached the Lower Low area of the channel.
Ukraine Support Package
Ukraine is currently going bankrupt as a result of all the war spending on the crimes that Russia is committing for the past couple of months. The UK wants to support Ukraine in investigating these war crimes. In order to do so, the UK is providing the Ukrainian Prosecutor General with a support package. This support package contains £2.5 million and should be more than enough to support Ukraine in the International Criminal Court (ICC) so they can finally stop Russia and give them the punishment that they would deserve.
Economists at the Relief Web reveal, “The UK’s £2.5 million packages of support for 2022 to 2023 will be delivered through the Atrocity Crimes Advisory group (ACA), which was established in May in conjunction with the EU and US to support the OPG with the gathering of evidence and prosecution of war crimes. The package includes the deployment of Mobile Justice Teams to the scene of potential war crimes, training of up to 90 judges, forensic evidence gathering, and support from UK experts in sexual violence in conflict. It follows £1 million in support already provided by the UK for justice and accountability efforts, as well as technical expertise. The UK deployed a team of war crimes experts to Poland in May to scope out where UK support for the Prosecutor General would be most effective, and the Ukrainian Prosecutor General visited the UK later that month.”
BOE Saporta Speech
Victoria Saporta, who is the Executive Director of the Bank of England, gave a speech at the bank where she talks about regulatory bodies and their policies. She reveals, “Releasing a great portion of capital buffers naturally means that firms are allowed to get closer to minimum requirements. But if firms perceive that buffers are not usable in an economic downturn and that they need to stay well above minima they will do so by cutting lending or fire selling assets. Those behaviors typically lead to an amplification of losses that firms need to absorb during the stress and, therefore, will ultimately hurt the banking system itself. With appropriate controls, making the CCoB releasable will enhance also the resilience of the banking system. For instance, effective supervision and stress testing could inform the decision to release the CCoB with an ex-ante assessment of the banking system’s ability to absorb potential future losses without breaching minima – a number of authorities did and published such tests in the midst of the pandemic.”
She further states, “The evidence suggests that we need to find a way to preserve the intended effect of MDAs – the capital conservation effect – and get rid of the unintended effect – the market stigma inducing firms to deleverage. One way to do so might be to consider a broader form of capital conservation that applies distribution restrictions to firms irrespective of their capital ratios during the stress. A similar tool would achieve two main objectives. First, it would support resilience and avoid banks, after the release of the CCOB, making imprudent capital outlays instead of supporting lending to the real economy. Second, a sufficiently broad-based application of restrictions would mitigate the market stigma generated by firm-specific MDAs and support more buffer use. Such tools were unpopular in part because of fear of investor reaction but also because they were not an explicit and predictable part of the framework; this proposal will enhance predictability. While disclosures increase the transparency of banks’ liquidity positions and can enhance discipline and market pressure to maintain strong liquidity positions ahead of a shock, they can also lead to a range of knock-on impacts during periods of market stress.”
