GBP/USD awaits Bank of England meeting near April lows

The pound sterling barely reacted on Wednesday to weaker-than-expected UK inflation data. Investors preferred to take a wait-and-see approach ahead of today’s labour market statistics and the Bank of England meeting. However, GBP still had to respond to movements in the US dollar following the Federal Reserve meeting.

Inflation in May remained at 2.8% y/y, while the market had expected it to accelerate to 3.0%. The weaker-than-forecast data revived the debate over whether the Bank of England will need to raise interest rates at all this year.

Market participants are still pricing in one rate hike before the end of the year. However, if the regulator signals that it is ready to maintain the current policy stance without taking additional steps, this could increase pressure on the British currency.

The Bank of England meeting itself is expected to end with no change in the interest rate. Nevertheless, some members of the Monetary Policy Committee, including Chief Economist Huw Pill, may once again vote in favour of tighter policy. This will be closely watched by the market.

Investors will also pay close attention to employment data, which will serve as an important reference point for the Bank of England’s future decisions. At the same time, the market is monitoring political developments in the UK, as possible changes within the ruling Labour Party could add a political risk premium to the pound.

For now, GBP remains relatively stable. However, the next 24 hours may prove decisive for expectations regarding the Bank of England’s interest rate path and the further dynamics of the British currency.

GBP/USD technical analysis

On the H4 chart of GBP/USD, the market has completed a downward wave to 1.3262. A growth link towards 1.3340 is expected. In practice, a broad consolidation range is forming below this level. If the price breaks out of the range upwards, the potential will open for the wave to continue towards 1.3500. If the price breaks out downwards, the potential will open for a further decline towards 1.3194. Technically, this scenario is confirmed by the MACD indicator: its signal line is below zero and directed firmly downwards.

On the H1 chart of GBPUSD, the market has formed a compact consolidation range around 1.3300. At the moment, the range has expanded downwards to 1.3297. Further growth towards 1.3340 is expected. Technically, this scenario is also confirmed by the Stochastic oscillator: its signal line is above 50 and directed firmly upwards towards 80.