The GBP/USD exchange rate continued its strong sell-off after last Friday’s UK GDP data and as traders waited for the upcoming Federal Reserve and Bank of England decisions. The pair retreated to a low of 1.2630 on Monday, down from the month-to-date high of 1.2810.

UK economic slowdown

There are signs that the UK economy is not doing well. Data released on Friday showed that the economy contracted by 0.1% in October after contracting by 0.1% in the previous month. It was a weaker slowdown than the median estimate of 0.1%.

This slowdown translated to a year-on-year growth of 1.3%, also lower than the median estimate of 1.6%. 

More data showed that the country’s trade deficit widened to over £18 billion in October from £16.32 billion a month earlier. The deficit was also higher than the median estimate of £16 billion.

Another report showed that the UK manufacturing production dropped by 0.6% in October, a smaller drop from the previous minus 1.0%.

Industrial production dropped by 0.7% during the month, while construction output slipped by 0.7% on a YoY basis.

These numbers mean that the economy was still struggling, a trend that may continue in the comig months.

Looking ahead, the Office of National Statistics (ONS) will publish the latest jobs numbers on Tuesday. Economists expect the data to show that the unemployment rate rose from 4.3% in September to 4.6% in October. The average earnings ex bonus is expected to come in at 5.0%. With bonuses, the index is expected to come in from 4.3% to 4.7%.

These numbers will come a day before the ONS publishes the latest consumer price index (CPI) data. Economists polled by Reuters expect the data to show that the headline CPI rose from 2.3% to 2.6%. 

Core inflation, which excludes the volatile food and energy prices, is expected to move from 3.3% to 3.6%, a sign that inflation was moving in the wrong direction. It had dropped to below 2% a few months ago.

Therefore, the Bank of England will be in a dilemma on Thursday since the UK has moved into a stagflation period. Stagflation is a situation where the economy is slowing at a time when inflation is rising.

It is a big dilemma becaus a rate cut may stimulate the economy but also lead to higher inflation over time. 

Federal Reserve decision ahead

The GBP/USD exchange rate will also react to Wednesday’s Federal Reseve decision. Economists expect that the Fed will slash rates by 0.25%, bringing the year-to-date cuts to 1%.

The Fed is mostly concerned about the labor market at the expense of inflation. Data released this month showed that the unemployment rate rose from 4.1% to 4.2% even as the economy added over 200k jobs. These job additions were mostly because the hurricanes and the Boeing strikes ended.

Like the Bank of England, the Fed is struggling to deal with the stubbornly high inflation rate. Recent data showed that the headline CPI rose to 2.7%, while the core CPI remained unchanged at 3.3%.

Therefore, analysts expect a dovish tilt from the Fed as it cuts rates and points to more cuts in the coming months.

GBP/USD technical analysis

GBP/USD chart by TradingView

The daily chart shows that the GBP/USD exchange rate has dropped to 1.2600, its lowest point since November 7. This decline happened after the pair formed a rising wedge pattern, a popular bearish sign.

The GBP to USD pair has formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages crossed each other. Therefore, the pair will likely continue falling as sellers target the key support at 1.2500.

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The pound to Japanese yen pair held steady on Monday morning ahead of the upcoming Bank of England (BoJ) and Bank of England (BoE) interest rate decisions. The GBP/JPY exchange rate rose to 194, up from this month’s low of 188.05. 

Bank of Japan interest rate decision

The GBP/JPY pair rose on Monday after the encouraging economic data from Japan. According to the statistics agency, core machinery orders rose by 2.1% in October, higher than the median estimate of 1.2%. It was also a higher increase from the 0.7% contraction in the previous month. 

The core machinery orders rose by 5.6% on a YoY basis, also higher than the previous month’s increase of 0.7%. These numbers mean that the economy was doing well. On Friday, another report showed that Japan’s industrial production rose by 2.8% in October, higher than the previous 1.6%.

Data by S&P Global showed that Japan’s manufacturing PMI rose from 49 in November to 49.5 in December, higher than the median estimate of 49.2. The services PMI data rose from 50.5.

These are important numbers because they came as the market waits for Friday’s Bank of Japan interest rate decision. 

Economists expect the bank to hike interest rates again in this meeting. A 0.25% hike will bring the official cash rate to 0.5%, the highest level in decades.

The BoJ is mostly concerned about inflation, which has remained higher in the past few months. The most recent data showed that the headline Consumer Price Index (CPI) slowed from 2.5% in October to 2.3% in November. It has retreated from the pandemic high of over 4.8%.

Japan’s inflation has remained higher because of the energy prices and the depreciating currency. 

Bank of England decision

The GBP/JPY pair will also be in the spotlight as the UK releases important inflation data and as the Bank of England delivers the final decision of the year.

Economists polled by Reuters expect the data to show that the UK inflation rate rose slightly in November. Precisely, they expect the headline CPI figure to move from 2.3% to 2.6%, and the core CPI to move from 3.3% to 3.6%.

These numbers will be much higher than the Bank of England’s target of 2.0%. However, with the economy slowing, the bank will likely decide to cut interest rates in its meeting on Thursday.

The risk is that, while a rate cut may stimulate the economy, there is a risk that it will lead to higher inflation in the near term. 

The BoJ and BoE actions mean that the carry trade opportunity that has existed for years is no longer viable. In this, Japan investors used to move to higher-yielding countries like the UK as the country remained in negative rates.

GBP/JPY technical analysis

GBP/JPY chart by TradingView

The GBP to JPY exchange rate has been in a slow uptrend in the past few days. It has moved to the 23.6% Fibonacci Retracement level at 194.34. Also, the pair has moved slightly above the important support at 188, its lowest swing on December 3.

The pair has remained at the 50-day and 100-day Exponential Moving Averages (EMA), while the Relative Strength Index (RSI) has pointed upwards. Therefore, the pair will likely continue rising as bulls target the next key resistance point at 200. On the flip side, a drop below the support at 192 will invalidate the bullish view and point to a drop to 188.

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Mullen Automotive (MULN) stock price has crashed this year, as concerns about the company remained. It has plummeted by 99% this year, making it one of the worst-performing companies in Wall Street. 

This crash has brought its market cap to just $13 million, much less than the $240 million it spent buying Electric Last Mile Solutions (ELMS) and the $148 million it bought Bollinger Motors in 2022. 

Tesla wannabe in trouble

Mullen Automotive is one of the companies that sought to become a big competitor to other EV companies like Tesla.

However, like other similar companies, Mullen’s business has struggled, and odds of it filing for bankruptcy are rising.

Tesla’s success has meant that building an EV company from scratch is one of the toughest things. Tesla itself almost imploded several times before it became a profitable company. 

The same is happening with other EV companies. For example, Rivian, an Amazon-backed EV company has lost billions of dollars in the past few years, and was recently bailed out by Volkswagen. 

Lucid Group has also been a cash incinerator in the past few years. It has remained in business mostly because of the funding from Saudi Arabia. 

Other EV companies like Fisker and Lordstown Motors have not been lucky as their cash ran out pushing them to file for bankruptcy.

Mullen Automotive, could, unfortunately, join the club as its business continues to experience major challenges. 

MULN’s bankruptcy risks remain

The most recent results showed that the company had a net loss of over $326 million in the nine months to June 30. While that was a steep loss, it was a big improvement from the $806 million it lost in the same period last year. 

Notably, the company did not record any revenue for the first nine months of the year, an odd situation since it started deliveries last year.

Instead, Mullen Automotive said that it has invoiced its customers for 377 vehicles valued at about $16.8 million. It then deferred the revenue and accounts until the invoices are cleared and the return provision on the vehicles is nullified by the dealer. I believe that this is a big red flag for Mullen. 

Mullen Automotive ended the last quarter with over $3.5 million in cash and equivalents, down from over $155 million in the same period last year. Its restricted cash dropped from $429k to $414k in the same period. 

Therefore, its balance sheet makes it clear that Mullen does not have the funds it needs to continue its operations since it is losing millions of dollars.

The company is pegging its hopes on a $250 million funding commitment from a group of investors. It has received about $50 million, while $150 million of these funds will be pursuant to an equity line of credit. Mullen also received a commitment from an investor for $100 million in financing.

Still, it is still unclear whether these funds will come. And if they did, Mullen still needs much more money, which explains why the stock has crashed to a record low. 

Mullen Automotive stock price analysis

MULN chart by TradingView

The daily chart shows that the MULN share price has been in a freefall this year, and is trading at $1.58. It has remained below all moving averages, while the Average True Range (ATR) has moved flatlined. The ATR is a popular indicator used to measure volatility in the stock market.

Therefore, the path of the least resistance for the Mullen Automotive stock price is bearish, with the next point to watch being at $1. Our base case is where the company files for bankruptcy in the long term as its

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Canoo stock price has imploded, costing long-term investors millions of dollars over time. GOEV shares plunged by over 24% on Friday after it unveiled another round of furloughs as odds of survival remained slim. It has crashed by over 97% this year, bringing its market cap to over $13 million. 

GOEV bankruptcy risks remain

Canoo is a Tesla wannabe that aims to be a big player in the electric vehicle industry. Over time, the company has engineered several vehicles and received orders worth over $3 billion from organizations like NASA and Walmart. 

Canoo’s main difference from Tesla is that its vehicles target businesses, especially those that require last mile delivery solutions. This is a big market as these companies implement transition strategies from internal combustion engines (ICE). 

The company has made a lot of progress in the past few months. For one, it received a special economic zone from Oklahoma state and acquired some manufacturing equipment from Arrival, another Tesla wannabe that collapsed.

The challenge, however, is that Canoo has been a cash incinerator in the past few years. In this, it has lost millions of dollars during the research and development as many other EV companies have done in the past.

There are signs that the company’s end times are nearing as it continued to furlough more staff. In an SEC filing, the company said that it would furlough another ten employees, bringing the total to 50 workers. It is doing that to save its already low finances. 

There are significant risks that Canoo will ultimately file for bankruptcy or sell its business to another manufacturer. Other Tesla wannabes like Fisker Automotive and Lordstown Motors have already done that. 

Read more: Canoo stock analysis: the end is nearing for GOEV

Canoo balance sheet problems

The main reason why Canoo may file for bankruptcy is that it does not have adequate cash on its balance sheet. The most recent results showed that it had just $1.5 million in cash and equivalents. It also had about $3.9 million in restricted cash and $9.9 million in inventories.

These are significantly low numbers for a company that is burning substantial sums of money. Its last quarter results showed that its revenue was just $891,000, while its loss from operations rose to over $59.19 million. Its diluted loss per share was about 31 cents.

Its nine-month loss was over $112 million, an improvement from the $273 million it lost in the same period last year. 

Most EV companies, including companies like Rivian and Lucid are incinerating cash. The difference between them and Canoo is that they have access to capital. Rivian raised cash from Volkswagen, while Lucid is backed by Saudi Arabia, a country with “unlimited” sums of money.

Also, these companies have equity to sell. In Canoo’s case, its equity value has crashed to just $13 million, meaning that it has limited room to raise cash. Canoo has already diluted its shareholders as the number of outstanding shares has risen from 1.3 million in 2019 to 87 million today.

Canoo stock price analysis

GOEV chart by TradingView

The weekly chart shows that the GOEV stock price has been in a strong bearish trend in the past few months. It has now collapsed to a record low, a trend that may continue in the coming months.

The stock has dropped below the important support level at $1.20, its lowest level in March last year. It has also moved below the 50-week and 100-week moving averages, while the Relative Strength Index (RSI) and the MACD indicators have pointed downwards.

Therefore, the stock will likely continue falling, with the next point to watch being at $0.10. The risk, however, is that the stock could go through a short squeeze because of its high short interest.

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Electric vehicle stocks have diverged this year. On the one hand, we have Tesla whose shares have surged to a record high, giving it a market cap of over $1.4 trillion, and making it the eighth-biggest company in the world. 

Many EV companies, on the other hand, have imploded, with most of them fighting for survival. Some, like Fisker, Proterra, ELMS, Bollinger, and Lordstown Motors, have already filed for bankruptcy. Here are some top EV companies that could file for bankruptcy in the near term as their cash runs out. 

Faraday Future (FFIE)

Faraday Future is one of the top EV companies that may not survive for so long after spending $3 billion in capital in the last few years. 

The most recent results showed that the company’s business continued losing millions of dollars. Its revenue in the last quarter came in at $9 million, while its net loss came in at over $77 million. The nine-month loss was over $234 million.

Therefore, a company losing all this money can only survive if it has a solid balance sheet. Unfortunately, Faraday does not have this luxury, since it ended the last quarter with about $79 million in current assets. Its cash and restricted cash stood at $7.3 million. 

Faraday Future has secured $30 million financing, which will not be enough to fund its most ambitious plans. For example, it is working to launch mass-market vehicles priced at between $20,000 and $50,000. 

Therefore, there is a likelihood that the company will run out of money soon as its business continues. This explains why the Faraday Future stock price has crashed by over 95% this year.

Canoo (GOEV)

Canoo is another vulnerable EV stock that may not be around for so long. Like Faraday, the Canoo stock price has crashed by over 97% this year, bringing its market value to about $13 million. 

Canoo has a large market opportunity, which explains why it has received orders worth over $3 billion from companies like Walmart, NASA, and USPS. The challenge, however, is that the company is running out of cash and is already furloughing employees. 

The most recent results showed that the company had just $5.7 million in cash and short-term investments. These are tiny numbers for a company that is still losing substantial sums of money for all vehicles it sells. 

Mullen Automotive (MULN)

Mullen Automotive stock price has crashed by over 90% this year, dropping its valuation to about $13 million. Its market cap is significantly smaller than what it spent in acquisitions a few years ago. It acquired ELMS for $240 million and $180 it spent buying a 605 stake in Bollinger Motors. 

Like Canoo and Faraday, its biggest issue is that it is burning a lot of money and is taking too long recognizing revenue. In its most recent nine-month results, the company recorded no revenues and made a loss of over $300 million. Its deferred revenue was about $16 million for the nine-month period.

Mullen Automotive has limited cash on its balance sheet, even assuming that the company receives the $250 million it says it has received. 

There are many other EV companies that may not survive in the long term because of their balance sheet woes. Some of the other notable names are Xos Trucks, Dragonfly Energy, Lightning eMotors, Phoenix Motor, and Micromobility.

Some analysts believe that even some well-known EV brands like Rivian and Lucid are only surviving because of their wealthy backers. Rivian has received funding from Volkswagen, while Saudi Arabia backs Lucid.

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