GBP/USD braces for biggest BOE rate hike since 1995 around mid-1.2100s on “Super Thursday”


  • GBP/USD remains mostly steady inside a three-week-old bullish channel formation.
  • BOE is expected to announce a 50-bps rate hike amid concerns surrounding economic slowdown and rampant inflation.
  • Rate Statement, Governor Bailey’s speech will be more important amid hopes of conveying recession fears.
  • Mixed US data, Fedspeak also contributes to the market’s inactions ahead of BOE, NFP.

GBP/USD portrays the cautious mood ahead of the Bank of England’s (BOE) monetary policy announcement during the early European morning on “Super Thursday”. In addition to the pre-BOE anxiety, a lack of market activity ahead of Friday’s US Nonfarm Payrolls (NFP), as well as mixed catalysts from the US, also restrict the Cable pair’s latest moves.

“The Bank of England is expected to raise interest rates by the most since 1995 on Thursday, even as the risks of a recession mount, in an attempt to stop a surge in inflation from becoming embedded in Britain's economy,” said Reuters ahead of the BOE announcements. It’s worth noting that the economic conditions in the UK are fragile and the political jitters, as well as the Brexit woes, add pressure on the “Old Lady”, as the British central bank is known.

Late on Thursday, UK PM hopeful Liz Truss mentioned that it would look to change the Bank of England’s mandate to ensure it controlled inflation, per the Financial Times (FT). Given Truss’ leading status in the UK PM race, the BOE may act aggressively this time. However, the central bank’s future moves and economic forecasts will be more important to watch for clear directions.

Also read: BOE Rate Decision Preview: Bailey to follow Powell’s footsteps with a dovish hike

On the other hand, China’s actions in the Taiwan Strait appear to weigh on the market sentiment and tame the GBP/USD prices. Recently, Taiwan’s Foreign Ministry crossed wires, via Reuters, saying that China is attempting to alter the status quo in the Taiwan Strait. However, Bloomberg’s news suggests the US Democratic Party members’ dissent to the US-Taiwan ties appears to tame the fears of the US-China tussles due to US House Speaker Nancy Pelosi’s Taiwan visit.

Elsewhere, St. Louis Federal Reserve Bank President James Bullard, a top hawk, was joined by Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin to exert downside pressure on the GBP/USD pair the previous day. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

Amid these plays, the S&P 500 Futures clings to mild losses at around 4,150 and the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

Given the risk-off and the pre-BOE anxiety, GBP/USD could remain sidelined. That said, the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, will also decorate the calendar and are important to watch too.

Technical analysis

GBP/USD pair’s rebound from the three-week-old channel’s support line joins firmer RSI (14) and the bullish MACD signals to keep buyers hopeful. With this, the recovery moves can aim for the multiple highs marked during late June, around 1.2330 ahead of challenging the aforementioned channel’s resistance line, at 1.2345 by the press time.

Meanwhile, pullback moves need validation from the channel’s support line, at 1.2120 by the press time, a break of which could direct the quote towards the previous resistance line from February, near 1.2100. Also acting as short-term key support is the convergence of the 21-DMA and the resistance-turned-support line from June 16, close to 1.2030-25.

Additional important levels

Overview
Today last price 1.2153
Today Daily Change 0.0004
Today Daily Change % 0.03%
Today daily open 1.2149
 
Trends
Daily SMA20 1.2023
Daily SMA50 1.2201
Daily SMA100 1.2499
Daily SMA200 1.2965
 
Levels
Previous Daily High 1.2208
Previous Daily Low 1.21
Previous Weekly High 1.2246
Previous Weekly Low 1.196
Previous Monthly High 1.2246
Previous Monthly Low 1.176
Daily Fibonacci 38.2% 1.2141
Daily Fibonacci 61.8% 1.2167
Daily Pivot Point S1 1.2097
Daily Pivot Point S2 1.2045
Daily Pivot Point S3 1.1989
Daily Pivot Point R1 1.2205
Daily Pivot Point R2 1.226
Daily Pivot Point R3 1.2312

 

 

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.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

AUD/USD: Bears are making their move

AUD/USD: Bears are making their move

Bears remain below the counter-trendline resistance which leaves the focus on the downside. AUD/USD bears could be about to move in for a run to 0.6800. The price is being rejected by the counter trendline resistance and is forking the makings of an M-formation in the process.

AUD/USD News

EURUSD returns 1.0200 as the market mood sours

EURUSD returns 1.0200 as the market mood sours

The EUR/USD pair is battling to hold above the 1.0200 mark, undermined by a souring market mood. The European energy crisis adds to the poor performance of the shared currency.

EUR/USD News

Gold aims to recapture $1,800 as investors trim US Inflation forecasts

Gold aims to recapture $1,800 as investors trim US Inflation forecasts

Gold price is displaying a volatility contraction after printing a fresh monthly high at around $1,800.00 on Tuesday. The precious metal witnessed a decent north-side move on Tuesday and later on turned sideways ahead of US CPI.

Gold News

Iran adopts crypto in foreign trade, debuts with $10 million import order

Iran adopts crypto in foreign trade, debuts with $10 million import order

In a watershed moment for crypto adoption, Iran registered its first official order for importing $10M worth of goods paid for in cryptocurrencies. A private Iranian news agency reported that the Ministry of Industry, Mine and Trade has plans to widely use cryptos in foreign trade.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Forex MAJORS

Cryptocurrencies

Signatures