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The British pound has extended its losses in the Wednesday session. GBP/USD is currently trading at 1.36485, down 0.36% on the day.

Pound slides on petrol shortage

The pound plunged 1.15% on Tuesday, its worst daily performance in over a year. The downturn was not due to a political crisis or soft UK data, but rather a shortage of petrol. To be more precise, there is a shortage of about 100 thousand truck drivers in the country, and this has resulted in many service stations running out of fuel. The situation has become so severe that the government is mulling calling in the army to provide truck drivers to deliver fuel shipments.

The shortage of drivers has been exacerbated by the Covid pandemic and Brexit, which has caused many foreign workers to leave the UK and return to the European Union. The British Chamber of Commerce is warning that the fuel shortage could cause severe damage to the economy, and the pound has been hit hard, falling to its lowest level since mid-June.

The US dollar has gained ground courtesy of comments from Fed Chair Powell in testimony before a congressional committee. Powell told lawmakers that high inflation could last longer than anticipated, warning that inflation “will likely remain so in coming months before moderating”. Powell has long insisted that high inflation is transient, but his latest comments will strengthen expectations that the Fed will finally taper its bond purchase program before the end of the year. Fed President James Bullard was even more hawkish, calling for the Fed to act aggressively in the face of high inflation and saying that could mean two rate hikes in 2022. US Treasury yields are moving higher and with tapering imminent, the US dollar’s tailwinds could get stronger.

GBP/USD Technical Analysis

  • There are resistance lines at 1.3851 and 1.3975
  • 1.3666 is a weak support line. Below, there is support at 1.3605