New UK Prime Minister is to Freeze Gas Bills

New UK Prime Minister is to Freeze Gas Bills

2022-09-05 • Updated

After the resignation of Boris Johnson in July 2021, the conservative party had to conduct an election. With 57.4% of the vote, Liz Truss will be the new UK Prime Minister (PM) for the next two years. She is about to change a lot in the UK politics, and we are about to tell you everything you need to know.

How did the election go?

Liz Truss got 57.4% of the vote, and Rishi Sunak received 42.6%. It was the first time since 2000 that a new PM got less than 60% of the vote. However, Truss had enough to win the race.

After arriving at 10 Downing Street, Truss will probably start with energy. She will introduce a price freeze for energy bills on Thursday, September 8, to save households and businesses from ever-growing electricity and gas costs. A typical UK household energy bill rose from £1,971 to £3,549 since the Russian invasion of Ukraine started.

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Price for the gas in the UK

A published version of the industry plan suggested holding down this year’s energy payments at £2,000 for a typical household. That would leave prices not far off that level into the next decade and require a fund of around £90 billion. At first glance, this measure will help households to withstand this winter. However, households will have to repay the money in the future.

Moreover, it’s possible to see some monetary easing in the nearest term despite the highest inflation in 40 years. This measure is designed to speed up economic growth and help companies and people to hold throughout winter. It will be a different approach than hawkish measures from the Fed and the ECB. Thus, more interesting for us and provides better trading opportunities.

GBP outlook

Freezing the energy bills and possible monetary easing may be a solid bearish factor for the GBP. The inflation and high energy prices won’t go away in a year, so without the support of the currency, the GBP may fall below the demand zone and continue the downtrend.

However, the demand zone is a solid support area that may require much time to be broken. If we see strong buying activity, GBPUSD may retest the resistance of 1.1740 over the next several weeks. Otherwise, the pair may reach 1.1000, a 4500-point decline, this year.

GBPUSD weekly chart

Resistance: 1.1740, 1.2300, 1.2700

Support: 1.1450, 1.1000

  GBPUSDWeekly.png

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