GBP/USD: Evolution and Outlook
We'll explore the factors that have shaped the GBP/USD pair since 2020 and wrap up by discussing the pair's future movements.
In this article, we'll explore the primary factors that have influenced the trajectory of the GBP/USD pair starting from 2020. We'll conclude by highlighting the elements that could steer the pair's subsequent trends.
1. January 2020–May 2021: Robust Uptrend After the Pandemic's Volatile Period
In the initial months of 2020, as the pandemic took hold, a rush towards safe-haven assets along with prevailing market anxieties caused significant volatility in the GBP/USD market.
After the initial drop, the pair swiftly displayed a long white real body by the end of March 2020. Observe how a subsequent pullback halted at the midpoint of the substantial white/green body.
2. June 2021–September 2022: The Top and the Subsequent Decline
The GBP/USD pair gave its first sign of a potential top with a long upper shadow in February 2021. A few weeks later, the appearance of a tower top, which includes a series of spinning tops, reinforced the likelihood of a reversal.
3. October 2022–August 2023: Substantial Recovery
The extended decline halted in September 2022 via a piercing pattern which, given the extremely oversold conditions of the market, signaled the bottom and the subsequent reversal.
A dark cloud cover in July 2023 marked the beginning of a pullback of the upward trend.
4. Outlook for Late 2023 and Throughout 2024
Although the near-term direction of the GBP/USD pair is still unclear, various key factors have the potential to influence its upcoming trajectory:
- Influence of AI on Market Mood: The advent of artificial intelligence could tilt market sentiment, possibly favoring riskier assets like the GBP/USD.
- Worries About Economic Contraction: The Federal Reserve's aggressive rate-increase strategy, coupled with worrisome signs such as an inverted yield curve and other predictive economic indicators, points to the possibility of a global economic downturn in 2024. The U.S. dollar is commonly viewed as a "safe-haven" currency. During periods of global instability or geopolitical strife, investors may flock to the dollar.
- Rising National Debt: A significant increase in the federal budget deficit is fueling concerns about escalating public debt, which could impact the valuation of the USD in the near future.
