The cable pair is traded at its low level today London session. Amid widespread risk-on sentiment, the US dollar withdrawal, the recent resilience of the cable pair, and the pessimism surrounding Brexit-led challenges have recently reassured pair sellers in the UK petrol supply.  The UK government has decided to temporarily suspend competition rules for the country’s downstream oil sector in an attempt to alleviate supply-chain issues at fuel service stations. The measure known as the Downstream Oil Protocol will exempt the industry from competition legislation so information can be shared and fuel supply optimised. “While there has always been and continues to be plenty of fuel at refineries and terminals, we are aware that there have been some issues with supply chains,” business secretary Kwasi Kwarteng said.

The government has implemented the long-standing contingency plans after a sustained period of panic buying by motorists over the past few days forced many UK fuel service stations to close, with others running short of at least one grade of gasoline or diesel. The rush on service stations began late last week when it emerged that a shortage of qualified heavy goods vehicle (HGV) drivers had disrupted fuel supply to some forecourts. BP, which operates the largest number of filling stations in the UK, said at the time that 50-100 of its more than 1,200-strong network were running out of at least one grade of fuel and that a handful had been forced to close temporarily.

Unfortunately, this is just the start of price increases. The price cap changes each October and April, and experts are already warning that it will rise again next spring – to the equivalent of between £1,455 and £1,500 a year. This is for average use, with big-using households paying considerably more annually. The hope is that the market calms down and wholesale prices return to normal, at which point consumer prices should also fall. “Commerce Secretary Kwazi Kwarteng met with industry executives on Sunday and led them to panic over the purchase of fuel through supply chain pressures,” Sky News reported. To tackle the energy crisis, UK Prime Minister Boris Johnson and his team are ready to seek military support.

“Ministers should discuss Emergency Plan Operation Escalin after the PP reveals a one-third shortfall in its forecasts,” The Guardian said. There is weighing concern over the British pound (GBP) which has led to an increase in the number of virus-led deaths and manpower shortages in the UK. However, after the 16-year rule of Angela Merkel, a power vacuum in the German election camp is emerging, allowing the UK to benefit from the Brexit decision unless someone else, France, dictates it.

On the other hand the analyses by provisional count, Germany’s Social Democrats (SPD) won the federal election by a narrow margin, Reuters reports. Complex coalition negotiations involving the various parties will now take place in the weeks and even months ahead. More likely the successful coalition will see either of the two smaller-sized blocks, the Free Democrats (FDP) and Greens, govern with either the Conservatives (the so-called ‘Jamaica coalition’) or with the Social Democrats (the so-called ‘traffic light coalition’). 

Whichever form the new government takes and despite giving the two smaller parties tremendous power as king-makers, it is expected to be seen as a government providing stability and continuing to occupy the centre ground. When finding catalysts for market optimism, one can welcome US stimulus. It is noteworthy that the lack of Evergreen news and a little silence about the central bank’s concerns increases our bright risk appetite.

GBP/USD 4 Hour Chart:

Support: 1.3641 (S1), 1.3610 (S2), 1.3562 (S3).

Resistance: 1.3719 (R1), 1.3767 (R2), 1.3798 (R3).

Amidst this above catalysts the cable is on downtrend ahead of UK energy crisis and German Election outcome.  We expect a bearish trend for GBP/USD.