Under the current conditions, when financial regulators increase interest rates, potentially one of the best conditions for trading the pound sterling/US dollar currency pair has formed.
During transactions with the GBP/USD pair, the UK national currency is the base unit, and the United States dollar acts as the currency unit of the quotation. The cost and rate of this pair of currencies is the number of US dollars that you need to spend on the purchase of 1 pound sterling.
When trading currency pairs, traders operate with a pair of continuously changing indicators: BID and ASK (purchase and sale price, respectively). The dynamics of the quotes of the currency pair is measured in pounds equal to 0.0001 of its value.
The difference between BID and ASK is called spread. This is the commission payment of a trader to a broker. In the case of GBP/USD pair trading, the most profitable spreads occur mainly in the best hours for dealing, as well as on advanced accounts for trading.
The main factors influencing the price of GBP/USD
Britain is a major player in the global market. In this regard, there are many things that affect the price ratio of the British pound and the US dollar. The main factors affecting this indicator are:
- Interaction between the economies of Britain and the United States. With the strengthening of the United Kingdom economy and the weakening of the US economy, the GBP/USD rate goes up. The opposite is also true.
- actions of the British Central Bank. The country’s financial regulator reports on its monetary policy on a monthly basis, detailing the reasons for the decision regarding the interest rate. In most cases, the currency unit begins to weaken with the expected decrease in interest rates and increase if rates are expected to increase.
- political decisions of the authorities. Resonance incidents in the field of politics can provoke a strong increase in the volatility of exchange rates. Elections and changes in political parties can also be tangibly affected by the GBP/USD course.
- Economy. All of the above factors can affect long-term market trends, but there are also less significant economic events that can also affect the GBP / USD rate, but already at a short distance. Among them are publications of data on retail sales, growth rates of consumer prices, employment, and so on.
A significant number of traders trading within one day prefers to make deals on the British pound/USD pair on important news publications. This allows you to profit from the volatility that rises against the backdrop of the news. Long-term market players are also actively watching the news in the field of economics, which may affect GBP/USD. This makes it possible to identify market trends.
To track economic news that may affect the rates of certain currencies, specialized information resources must be found.
Optimal time for GBP/USD trading
In the case of this currency pair, the best trading session in the European region is the best deal for dealing, since the British market and traders are active at this time. The US trading session can provide additional trading volume thanks to the actions of traders from this country.
In general, the graph of the currency pair is dynamic all the time, reflecting the continuous change in the rate against the backdrop of the publication of more and more news. But on a more detailed examination, it can be seen that the highest volatility on the graph is invariably recorded when opening the main trading sessions. The lowest fluctuations in the graph are observed outside of these clocks.
It is for this reason that traders consider the time of opening the main trading sessions to be the most suitable for GBP/USD transactions, although in general, trading this pair is possible in all 5 trading days of each week around the clock.
What to expect from GBP/USD in 2022?
This year there are historical events for the entire currency market and a pair of pound sterling/US dollar is no exception. The cause of large-scale changes is the decision of many Central Banks to raise interest rates, which has not happened since the crisis of 2008. Thus, it is especially interesting to observe the dynamics of different currencies paired with a British pound against the backdrop of attempts to navigate this currency in the difficult economic conditions of an independent state that has left the EU.
In 2022, the British Central Bank has already increased the interest rate several times and now it is at a level that has not been since the last recession in the financial market. This happened against the backdrop of a serious increase in the cost of living associated with the energy crisis and the consequences of the global epidemic. Many experts believe that after a long period of high inflation, stagflation will begin in the country. The British Central Bank also admits that a recession may soon begin in the state.
