GBP/USD Forecast: waiting for the BOE

Valeria Bednarik FXStreet

The GBP/USD pair consolidates at the lower end of Wednesday's range ahead of the main event of the day, the BOE monetary policy meeting. Hopes that the Central Bank will act sooner than later sent the pair up to 1.3328, its highest in a year after the release of higher-than-expected inflation. But poor wages growth, lagging well behind inflation, dented chances of a rate hike, resulting in the pair shedding over 100 pips. The slide was fueled by resurgent demand for the greenback, on hopes the US government will finally start working in a tax reform.

Attention is centered in the BOE right now, and how the MPC vote will distribute, as no changes are expected to rates, or the APP program. Last month, 2 out of 8 members voted for a hike. The incorporation early this month of David Ramsden has brought the account back to 9, but he is actually expected to join doves. There's some speculation that Andy Haldane could join Michael Saunders and Ian McCafferty in voting for a hike this time, which may be Pound positive.

Last time, Carney said that two rate hikes could be expected in the next two years, but that the first would take place once inflation stabilizes, by the end of 2018. Any change to that wording, or revisions to the growth or inflation figures, will also affect the GBP.

Technically, the pair is trading below the 23.6% retracement of its latest bullish run, around 1.3225 where in the 4 hours chart, it also has a 20 SMA. If the pair regains the level, the pair could rally back up to the 1.3300 region. To the downside, the key support is the 38.2% retracement of the same advance at 1.3165, with a break below it opening doors for an extension towards the 1.3100/20 region.

View live chart of the GBP/USD

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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