British Pound (GBP) Price Outlook: GBP/USD Downtrend May Resume

• After its decent rally since the end of last month, GBP/USD now looks likely to fall back, although it could remain around the 1.36 level for a while first.

• Talk in the UK media of stagflation persists, and a dire set of new car registration figures will do nothing to counter that narrative.

GBP/USD COULD HOLD STEADY, THEN DROP

GBP/USD is in an interesting position, having rallied from the September 29 low at 1.3412 to around 1.36. Near-term it could well stay close to that level but further losses afterwards cannot be ruled out.

GBP/USD PRICE CHART, DAILY TIMEFRAME (APRIL 22 – OCTOBER 5, 2021)

UK NEW CAR REGISTRATIONS TUMBLE

A key talking point in the UK media – although less so in the markets – is the threat of stagflation in the UK caused by weak growth and strong inflation. That narrative was fed Tuesday by news that British new car registrations fell last month by 35% year/year to 214,000 units, according to preliminary data from the Society of Motor Manufacturers and Traders that marked the weakest September for at least 23 years.

The SMMT added that the vehicle industry continued to be plagued by a global shortage of semiconductors used in car production.

The strong crude oil price is also fuelling inflation expectations at a time when supply-chain disruptions continue to plague the supply of fuel to petrol stations in London and the south-east of England.

Source: DailyFX