- The British pound has fallen again during the trading session against the U S dollar on Friday as the GDP month over month in the United Kingdom came out at negative 0.1% instead of the anticipated positive 0.1%.
- In other words, the British economy is slowing down, and it makes sense that the British pound would suffer as a result.
All things being equal, the British pound has held its own against the US dollar in comparison to other currencies. But now it looks like the United Kingdom is also struggling right along with the rest of the European Union, Switzerland, and most economies in that region of the world. That being said, it does make a lot of sense that the US dollar should continue to strengthen because most foreign money is ending up in the United States instead of other foreign countries as the United States economy is the envy of the world at the moment.
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These things are fluid but right now it looks like the U S economy continues to grow. Despite the fact that there are concerns about inflation. As long as that's the case, then money will go to where it's treated best and right now that's the United States.
If the Bank of England is forced to start rapidly cutting like it's Swiss and European counterparts, then the US dollar will continue to enjoy momentum. You could squint a bit here and make an argument for a bearish flag, especially now that the 50-day EMA has broken below the 200-day EMA, forming the so-called death cross.
But really at this point, I think it's just easier to suggest that rallies that show signs of exhaustion will get sold into and the British pound will more likely than not drop down to the 1.25 level. If we can break above the moving averages near the 1.2840 level, then maybe things change, but I think the last couple of days have really told us what we need to know about cable.
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