GBP/USD Price Analysis: Sterling Falling Ahead of the BoE Rate Decision

GBP/USD Price Analysis: Sterling Falling Ahead of the BoE Rate Decision

  • Investors expect a 50 basis point rate hike from the BoE.
  • Inflation in the UK might get to 15% in early 2023.
  • In the charts, sentiment has shifted to the bearish side.

Today’s GBP/USD price analysis is bearish ahead of the BoE meeting. Even as the chances of a recession increase, the Bank of England is anticipated to increase interest rates today by the most since 1995. This hike is an effort to avoid a spike in inflation affecting the British economy.

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When the BoE chooses 1100 GMT, most investors and economists expect it to raise its benchmark rate by half a percentage point to 1.75 percent, its highest level since late 2008 at the beginning of the global financial crisis.

As the effects of Russia’s invasion of Ukraine mix with post-pandemic stresses on the global economy, Britain’s primary inflation rate has risen to 9.4% and may reach 15% in early 2023, according to the Resolution Foundation think tank.

The BoE declared in June that it would take decisive action if inflation pressures persisted for an extended period.

“We know they’re worried about sterling, and in that sense, they don’t want to be left as the odd one out by not joining the 50-basis-point club,” James Smith, an economist with ING, said.

GBP/USD key events today

The Composite PMI Index will gauge the UK’s purchasing managers’ activity level in the manufacturing and services sectors. A reading above 50 will show sector expansion, while one below 50 will show sector contraction.

The Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) will report on business in the United States. The composite index is an indicator of the overall economic condition of the non-manufacturing sector.

GBP/USD price technical analysis: Bears successfully broke the 30-SMA

GBP/USD price analysis

The 4-hour chart shows a shift in sentiment from bullish to bearish, as seen in how the price broke below the 30-SMA. This break comes after the price found resistance at the 1.22795 level. The RSI also favors bearish momentum as it has broken below 50.

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The price has retested the SMA as support and will likely head lower. The next target for bears is at the July 29 lows at 1.20650, where the price will experience support.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.