GBP/USD: BoE may provide an upbeat outlook and boost the pound

GBP/USD has been falling in a counter-reaction to the dovish Federal Reserve decision which may offer a sterling buying opportunity as the Fed fallout may make way to a Bank of England boost, Yohay Elam, an Analyst at FXStreet, reports.

See – Bank of England Preview: Forecast from 10 major banks

Key quotes

“The Fed surprised by signaling it would only raise interest rates in 2024. Moreover, the Fed's reactions are now ‘outcome-based’ rather than trying to stay ahead of the curve. The Washington-based institution would begin talking about the tapering of bond buys or rate hikes only after the economy significantly bounces back.”

“In the US, further reactions to the Fed and the movement in yields are set to impact the greenback – with weekly jobless claims serving as a temporary sideshow. A small drop in employment applications is on the cards.”

“The ‘Old Lady’ is probably to see rising returns on UK Gilts as a sign of better growth prospects. The UK vaccination campaign has already reached more than one in three Brits and coronavirus cases are falling at a satisfactory rate.”

“The BoE does not hold a press conference and will likely remain silent on yields – and staying mum means allowing them to rise. Such an increase in yields would allow the pound to recover – even if the dollar storm continues.”

“For bulls to rage, GBP/USD needs to convincingly surpass the psychological barrier of 1.40 – which has capped the pair twice in the past week. Support awaits at the daily low of 1.3935.”

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