GBP/USD Forecast: Pound up on hawkish BOE

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3711

The Bank of England said it would raise rates before trimming QE.
Evergrande´s restructure announcement brought relief to financial markets.
GBP/USD trades near a critical Fibonacci resistance level may advance further.

A better market mood helped GBP/USD recover ground ahead of the Bank of England monetary policy decision. The upbeat sentiment was the result of news coming from China, as Evergrande, the indebted property development giant is likely to be restructured into three separate entities, to prevent financial disruption in the country. The pair was trading at around 1.3680 pre-BOE announcement.

The UK central bank left its monetary policy unchanged and the £895 billion facilities program on hold. The MPC voted 9-0 to leave rates on hold but voted 7-2 on reducing QE, while the statement noted that some developments strengthen the case for modest tightening. Still, policymakers said that uncertainties around the labour market remain.

The GBP/USD pair jumped higher after the BOE said that any initial tightening should be via bank rate, adding that the previous formal guidance is no longer useful in the present situation.

GBP/USD short-term technical outlook

The GBP/USD pair traded as high as 1.3719, touching the 61.8% retracement of the August/September rally before retreating modestly. The near term picture is bullish, as, in the 4-hour chart, the pair has surged beyond a now flat 20 SMA, while technical indicators head firmly higher within positive levels. The pair needs to clear the mentioned Fibonacci resistance level to gather additional momentum during the upcoming sessions.

Support levels: 1.3680 1.3640 1.3600

Resistance levels: 1.3720 1.3760 1.3805

View Live Chart for the GBP/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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