GBP/USD Forecast: Sterling clears 1.2950 heading to 1.3060 as BoE sticks with one rate hike a year outlook

The GBP/USD is trading up 1.5% at around 1.2950 level after the Bank of England said that no-deal Brexit is unlikely scenario sticking to its one rate hike a year policy. The news of the UK  reportedly signing the financial services deal with the European Union, were downplayed by the government officials, but Sterling was further boosted by the US ISM in manufacturing decelerating strongly to 57.7 in October as past interest rate hikes tighten the financial conditions for companies.

Although the overnight report from Financial Times indicated the financial services deal was closed between the UK and the EU, the UK government officials called it “unsubstantiated”. The GBP/USD rose to 1.2920 in the morning trading just retreat to 1.2877 after the government statement on financial services deal. 

The Bank of England’s shift supported Sterling and the deceleration in the US manufacturing saw Sterling rise to a fresh high of 1.2954.

After falling for two weeks in a row, the GBP/USD now broke above a key area of resistance at around 1.2810 confirming the trend reversal that easily busted the immediate targets of 1.2840 and 1.2900 on Thursday and opens the way for 1.2980 and then 1.3060 targets.

Given the speed of Sterling’s current appreciation, the immediate directional movement on Sterling should to on the downside with retracement towards 1.2900.  This scenario is supported by the elevated technical oscillators with Relative Strength Index and Slow Stochastics both rose to overbought territory. Although correction might see GBP/USD retreating to 1.2900 near term, the ultimate target in a corrective move lays at 1.3060 representing 23.6% Fibonacci retracement of Sterling falling from 2018 high of 1.4377 to 2018 low of 1.2662.