- The Bank of England is prepared to hike interest rates for the tenth consecutive time.
- The BoE may also hint at when the rapid rise in borrowing costs may end.
- The Fed reduced the tempo of rate rises with a quarter-point hike.
Today’s GBP/USD outlook is bullish. The Federal Reserve announced on Wednesday that it had significantly improved in the fight against high inflation. However, that “victory” would still necessitate raising its benchmark overnight interest rate further and keeping it elevated at least through 2023. This announcement pushed the pound higher against the dollar.
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The US Federal Reserve reduced the tempo of rate rises on Wednesday with a quarter-point adjustment.
The Bank of England is prepared to hike interest rates for the tenth consecutive time on Thursday to continue fighting runaway inflation. However, the bank may also hint at when the rapid rise in borrowing costs may end.
Britain’s economy is expected to enter a recession and perform worse than its peers in 2023. The unemployment rate is near its lowest since 1974. However, the housing sector is cooling quickly, and consumer and business confidence are poor.
According to Bailey, there are signs that inflation may be slowing after falling from a 41-year high of 11.1% in October to 10.5% in December.
At 1200 GMT on Thursday, investors are generally pricing in another half-point rate increase, bringing the Bank Rate to 4.0%, its highest level since 2008. However, others see a remote possibility of a quarter-point change.
GBPUSD key events today
All focus will be on the Bank of England meeting later today, where investors expect a 50bps rate hike. There will also be minutes from the previous BoE meeting and a speech from BoE governor Bailey.
GBP/USD technical outlook: Bulls poised to retest the range resistance
The 4-hour chart shows GBP/USD trading above the 30-SMA but within a larger consolidation. The price oscillates between the 1.2274 support and the 1.2425 resistance. There is strong bullish momentum as the RSI trades above the 50-mark.
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Bulls took over with a strong bullish candle when the price reached the support range. This candle broke above the 30-SMA, showing control had gone to the bulls. The price will likely now retest the range resistance. A break above this key level could begin a bullish trend.
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Saqib Iqbal
