- GBP/USD has built on Wednesday's gains, advanced beyond 1.2300 early Thursday.
- Bank of England is forecast to raise its policy rate by 25 bps to 4.25%.
- USD struggles to find demand following Fed's dovish shift.
GBP/USD has preserved its bullish momentum and climbed to fresh multi-week highs above 1.2300 following Wednesday's sharp upsurge. The Bank of England's (BOE) policy announcement is likely to trigger the next big movement in the pair.
On Wednesday, the US Federal Reserve raised its key rate by 25 basis points (bps) to the range of 4.75-5% as expected. In its policy statement, the Fed dropped the comment that ongoing rate increases will be appropriate and adopted a cautious language, saying "some additional policy firming may be appropriate." Additionally, the terminal rate projection in the dot plot stood unchanged at 5.1%.
During the press conference, FOMC Chairman Jerome Powell reiterated that they were not expecting to cut rates this year. Powell, however, further noted that the tightening in credit conditions in the wake of Silicon Valley Bank turmoil could mean that monetary tightening has less work to do.
Following some wild fluctuations during the Fed event, the US Dollar Index stayed under heavy bearish pressure and touched its lowest level since early February below 102.00 early Thursday.
Later in the session, the BOE is forecast to hike its policy rate by 25 bps to 4.25%. Market participants will pay close attention to the vote split. In case the policy statement shows that the decision was taken by a small margin of votes, markets could see that as a sign that the BOE could pause its tightening cycle at the next meeting and vice versa.
BoE Interest Rate Decision Preview: Preparing ground for a rate hike pause in May.
The stronger-than-expected Consumer Price Index figures reminded markets on Wednesday that inflation in the UK remained sticky in February. However, earlier in the month, the UK's Office for National Statistics reported a softening in wage inflation in January. Hence, it will be interesting to see whether the BOE will put more emphasis on wage inflation or price pressures in its policy statement. In case the UK central bank reiterated that inflation dynamics point to the need for additional tightening, GBP/USD could extend its rally, at least in the near term.
GBP/USD Technical Analysis
GBP/USD trades in the upper half of the ascending regression channel coming from early March. Furthermore, the Relative Strength Index (RSI) indicator on the four-hour chart stays below 70, suggesting that there is more room on the upside for GBP/USD before it turns technically overbought.
On the upside, 1.2370 (upper limit of the ascending channel) aligns as next resistance before 1.2400 (psychological level) and 1.2450 (static level from December).
1.2300 (mid-point of the ascending channel, psychological level, former resistance) forms first technical support. A four-hour close below that level could open the door for an extended correction toward 1.2250 (20-period Simple Moving Average (SMA), lower limit of the ascending channel) and 1.2200 (psychological level, static level).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Follow us on Telegram
Stay updated of all the news
EUR/USD closes in on 1.0700 amid broad USD strength
EUR/USD came under renewed bearish pressure in the American session and dropped to its lowest level since late March near 1.0700. Stronger-than-forecast PCE inflation data and hawkish comments from Fed's Mester provide a boost to the US Dollar and weigh on the pair.
GBP/USD loses bullish momentum after US data, falls below 1.2350
GBP/USD has reversed its direction and erased a large portion of its daily gains on Friday after the data from the US showed that the annual core PCE inflation edged higher to 4.7% in April. Although the pair clings to small daily gains below 1.2350, it remains on track to end the third straight week in negative territory.
Gold erases daily gains, holds above $1,940
Gold price turned south and declined to the $1,940 area in the American session on Friday. The benchmark 10-year US Treasury bond yield holds stead above 3.8% after stronger-than-expected core PCE inflation data from the US, not allowing XAU/USD to gain traction.
Ethereum price to outpace Bitcoin price as ETH jumps over key hurdle where BTC fumbles
ETH is working on its recovery after it dipped to a two-week low on Thursday. While Bitcoin price has failed to make a similar move and head back above $26,500, Ethereum is outpacing Bitcoin and has been able to push above $1,800.
Ford Stock: New agreement will give customers access to 12,000 Tesla chargers
Ford (F) stock has advanced about 2.5% early Friday following CEO Chris Farley’s announcement that Ford owners will be able to charge their EVs at Tesla Superchargers beginning in early 2024.