GBP/USD Forecast: Pound to edge higher on improving mood
- GBP/USD has started to push higher, supported by improving market mood.
- The pair is likely to face stiff resistance at 1.3160.
- BOE's Tenreyro says rise in oil prices could dampen UK economic activity.
GBP/USD has gained traction after having spent the Asian trading hours in a relatively tight range near 1.3100. The positive shift witnessed in risk sentiment is helping the pair push higher in the early European session and buyers could continue to show interest in the British pound if it manages to rise above 1.3160.
Ahead of Thursday's meeting between Russian Foreign Minister Sergei Lavrov and his Ukrainian counterpart Dmytro Kuleba, reports suggesting that Ukraine was no longer insisting on NATO membership revived optimism for a de-escalation of the crisis.
The UK's FTSE Index is rising nearly 2% on Wednesday and S&P Futures are up more than 1%, mirroring a risk-positive market atmosphere.
In the meantime, the British government announced on Tuesday that it will phase out its imports of Russian oil and oil products by the end of 2022. Bank of England (BOE) Monetary Policy Committee Member Silvana Tenreyro said that rising oil prices could dampen economic activity. Tenreyro further added that they were not observing any obvious evidence of a wage-price spiral in the UK.
In case the UK's action on Russian oil imports weigh on growth, the BOE could switch its stance and refrain from tightening the policy. Such a development is likely to hurt the pound.
Nonetheless, risk perception remains the primary market driver for now and GBP/USD could extend its recovery, at least until headlines surrounding the Russia-Ukraine crisis force investors to start to seek refuge.
GBP/USD Technical Analysis
In case GBP/USD rises above 1.3160 (former support that reversed March 2021-December 2021 downtrend, 20-period SMA on the four-hour chart) and starts using that level as support, it could target 1.3200 (psychological level) and 1.3250 (static level).
On the downside, 1.3100 (psychological level) aligns as the first support before 1.3050 (static level) and 1.3000 (psychological level, static level).
Meanwhile, the Relative Strength Index (RSI) indicator on the four-hour chart is yet to rise above, suggesting that the current recovery is a technical correction.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
