GBPUSD dipped below 1.2700 on Wednesday, but recovered in the second half of the day. The pair remained reasonably placid at about 1.2750 early Thursday. As investors await the Bank of England’s (BoE) monetary policy announcements.
The Bank of England’s policy rate is largely predicted to be raised by 25 basis points (bps) to 4.75%. Because there will be no post-meeting news conference. Market players will closely examine the policy statement for new hints on the policy outlook.
Although it is doubtful, a rate rise of 50 basis points would be observed. As a huge hawkish surprise and help the GBPUSD. Two policymakers voted in May to maintain the policy rate unchanged. If these officials become hawkish and the Bank of England raises interest rates unanimously. The Pound Sterling may remain robust versus its rivals. In that case, remarks on inflation trends might have an effect on the currency’s worth.
Inflation and wage inflation in the UK have been uncomfortably high since the last policy meeting. And the BoE’s expectations of inflation falling dramatically from April have shown to be, to put it mildly, wrong. Recognizing stubbornly high inflation and the need for more tightening might help the pound find demand.
GBPUSD, on the other hand, might fall if the BoE downplays the recent data. inflation figures and refrains from committing to more rate rises.
It’s worth noting that GBPUSD finished the previous three weeks in positive territory, gaining roughly 4%. The pair’s advance was fueled by strong wage inflation statistics from the UK and broad-based US Dollar depreciation following the Federal Reserve’s decision to suspend rate hikes. Markets appear to have already priced in a hawkish BoE decision, and they will want more than a 25-basis point increase to commit to another leg higher in GBPUSD.
GBPUSD Technical Outlook
Following the current comeback, GBPUSD failed to recapture the 20-period Simple Moving Average on the four-hour chart, and the Relative Strength Index (RSI) indicator slipped down towards 50, indicating that buyers remain cautious.
(Psychological) 1.2800 level, static level, ascending channel mid-point) align as significant resistance for GBPUSD ahead of 1.2830 (static level) and 1.2850 (14-month high achieved on Friday).
On the downside, temporary support is at 1.2740 (lower-limit of the ascending channel), with 1.2700 (Fibonacci 23.6% retracement of the most recent upswing, psychological threshold) ahead. A four-hour finish below the latter might entice sellers and set off a lengthy decline towards 1.2640 (Fibonacci 38.2% retracement).
