- The dollar is soaring against the pound after Powell’s hawkish comments.
- The BoE is expected to raise rates by 75bps.
- Inflation in the UK is expected to remain above 2% in 2023.
Today’s GBP/USD outlook is bearish as the dollar gains momentum on the back of Powell’s hawkish comments. However, this might change over the course of the day as the BoE is expected to deliver a 75bps rate hike.
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On Wednesday, the dollar gained momentum after Federal Reserve Chair Jerome Powell suggested it was premature to talk about pausing its rate hikes.
At the same time, the Bank of England is poised to increase borrowing costs by the most since 1989. With inflation still expected to be significantly higher than the BoE’s 2% target in 2023 and some of Truss’s expensive support for homes and businesses still in place, borrowing costs can only go up.
The new finance minister, Jeremy Hunt, reversed nearly all of Truss’ proposed tax cuts and decreased her income-boosting energy cap program’s duration from two years to six months. This alleviated some of Bailey’s concerns about inflation.
However, the BoE is still on high alert due to the steady spread of inflation throughout the British economy this year. About 90% of investors expect the Bank Rate to increase by 75 basis points to 3% on November 3. It will represent the largest increase by the BoE in 33 years.
GBP/USD key events today
The pair’s economic calendar is packed with US and UK releases. There will be initial jobless claims from the US and ISM non-manufacturing PMI reports. There will be PMI data from the UK, BoE’s rate decision, and a speech from BoE governor Bailey.
GBP/USD technical outlook: Prices primed for a move lower
Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50. The price respects the 30-SMA as resistance, showing a bearish trend. The 1.1619 key level posed a big challenge for the bullish trend, and bulls could not push above it.
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This was when bears returned with enough strength to break below the 30-SMA and the 1.1503 support level. Since then, the price has fallen to make a lower low. If bears maintain control, the price will likely fall to the 1.1269 support level.
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