The sterling is trading downside today against greenback amid the BOE interest rate decision and the concern over the fuel crisis. The greenback is uptrend against major currencies as investors rallied on rising energy prices and the Federal Reserve’s expectations of higher inflation. The British pound fears inflation and continues to struggle over the challenge of rising interest rates. Members of the Bank of England (BOE) and the Monetary Policy Committee (MPC) have suggested reversing last year’s interest rate cut at any time in the future. Under pressure as inflation rises to its 2% target, the Bank of England appears to be the first central bank in the world to raise interest rates since the onset of the corona virus epidemic.

In an interview released on Friday, Governor Andrew Bailey said inflation should be managed to prevent it from exceeding the target. While Britain shares its supply chain problems, rising energy prices and labor shortages with many countries around the world, it has exacerbated Brexit as a country where investors are particularly vulnerable to inflation and high policy rates. The BoE said last month that consumer price inflation would cross 4% by the end of this year, after which fuel prices and household energy costs have risen further.

In recent weeks, Britain’s limited stocks of natural gas left it heavily exposed to rocketing wholesale prices, while a shortage of truckers has dried up fuel pumps across the country. Governor Bailey has said the BoE can do nothing about supply chain sanctions that have raised inflation. Similarly, energy prices are beyond the control of the BoE. It is clear that the BoE will remain at historically low levels, even if rates increase in the future. Still, investors and economists are divided over the potential for a rise. But some BoE officials worry that individuals and businesses could lose confidence in their ability to control inflation if they do not act quickly.

Some economists are concerned because of  loss of momentum in Britain’s economy as it runs into post-lockdown shortages of supplies and staff, think the BoE will be forced to tighten policy only very gradually. British shopkeepers raised their costs in September at the lowest possible level since January as they worried about fuel shortages. Much of the country panicked last month over fuel purchases as supplies were disrupted due to a shortage of tanker drivers.

Nine out of 10 respondents were concerned about the impact of inflation on their household finances, with the Bank of England considering when to raise interest rates for the first time since the pandemic struck. The optimistic rate for the economy fell from 37% in August to 31%. Meanwhile, the British Retail Consortium (BRC) retail sales fell 0.6% year-on-year in September. Fuel shortages lead to poor performance. For now, traders are focusing their attention on measuring the UK’s Claimant Count Change, ILO unemployment rate, US JOLTS job opening market sentiment.

GBP/USD 4 Hour Chart:

Support: 1.3561 (S1), 1.3527 (S2), 1.3471 (S3).

Resistance: 1.3651 (R1), 1.3707 (R2), 1.3741 (R3).

Amidst this above catalysts the sterling is on lack of confidence among BOE interest rate decision and uncertainty over Energy crisis. We expect a bearish trend for GBP/USD.