GBP/USD plunges below 1.3500 as UK’s energy crisis worsens

• The British pound collapses below 1.3500 despite upbeat market sentiment.
• Surging natural gas prices and shortages of petrol and truck drivers in the UK, weigh on the GBP/USD pair.
• BoE’s Governor Bailey: Expects UK’s economy to recover to the pre-pandemic levels in early next year.

The GBP/USD crashes below 1.3500, down 0.84%, and is trading at 1.3422 at the time of writing. The cable has not been able to recover since Tuesday’s collapse of almost 200 pips, extending the losses to nearly 2% in just two days.

Market sentiment is upbeat amid robust US dollar demand across the board. Concerns about surging natural gas prices and petrol shortages in the UK outweighed a recovery.  On Tuesday, the British pound dropped in line with the risk-off market sentiment, sliding 1.18%, as investors look forward to central bank interest rate increases in the future.  

Additionally, the post-Brexit lorry-driver shortage is hurting oil companies, which warned that they did not have enough truck drivers to deliver gasoline and diesel from refineries to gas stations. Further, panic-buying fuel for almost a week is leaving pumps dry across the country. 

BoE’s Bailey expects UK’s economy to recover to the pre-pandemic levels in early next year

On Wednesday, in an ECB Central Banking Panel, the BoE Governor Andrew Bailey said that he expected the UK’s economy to recover to the pre-pandemic output level early next year than predicted in August. 

Meanwhile, during the European session, BoE’s Consumer Credit for August increased to £0.351B better than the £0.3B foreseen by analysts, though the GBP/USD did not react to the announcement. 

Across the pond, the National Association of Realtors released the Pending Home Sales for August. The figure came better than expected, increasing 8.1%, more than the 1.4% foreseen on a monthly basis. However, compared to the year-over-year figure, sales contracted by 8.3%, against an improvement of 14.5% for the same period. 

Meanwhile, in the US, Initial Jobless Claims are expected to drop to 335K. Further, the Gross Domestic Product for the second quarter on a yearly basis is predicted at 6.6%, in line with the previous period. Additionally, the Core Personal Consumption Expenditures (Q2) is foreseen at 6.1%.

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