- GBP/USD marches firmly, gaining some 0.17% on Thursday.
- The Bank of England (BoE) raised the Bank Rate to 1.75% in an 8-1 vote.
- Bailey and Co,, acknowledged that the UK would hit a recession, beginning late in 2022.
- US Initial Jobless Claims rose 260K more than expected as the labor market eases.
The British pound recovered some ground vs. the greenback after the Bank of England (BoE) hiked rates 50 bps, the highest increase in 27 years, while it warned that the UK economy would hit a recession during the second half of the year. That said, the GBP/USD seesawed in a volatile session, hitting a daily high at 1.2212 before plunging to 1.2065 daily lows. At the time of writing, the GBP/USD is trading at 1.2165, up by 0.16%.
GBP/USD pares its losses after a BoE’s dovish hike
On Thursday, the BoE raised the Bank Rate to 1.75% in an 8-1 vote, with Sylvana Tenreyro dissenting as she backed a 25 bps. The Bank of England foresees that the UK will tap into a 15-month recession later in the year, projecting GDP to tumble by 1.5% in 2023.
Regarding inflation, the BoE updated its forecast, which increased to 13% in 2022 Q4, more than the 9.4% estimated in June, and acknowledged it will remain elevated through the rest of 2022 and 2023, at the same time consumption further weakens. Additionally, the BoE announced that it would begin reducing its balance sheet by £10 billion a quarter from next month.
Later, after the BoE’s decision, US Initial Jobless Claims for the week ending on July 30 rose by 260K, higher than 259K estimated, a signal that the labor market is easing. Furthermore, the Balance of Trade in the US narrowed the US deficit to -$79.6 B from -$80.1 B estimations, while Exports jumped compared to imports.
All that said, the GBP/USD settled just below the 50-day EMA after a 150 pip volatile session. Although it stays under the daily moving averages (DMA), the Relative Strength Index (RSI) is aiming higher in bullish territory, keeping GBP/USD buyers hopeful of higher prices.
Upwards, the GBP/USD’s next resistance would be 1.2188, the 50-day EMA. On the downside, the first support would be 1.2100.
What to watch
The UK docket will unveil the Halifax House Price Index for July, alongside the BBA Mortgage Rate. On the Us front, the economic calendar will reveal July’s Nonfarm Payrolls figures foreseen at 250K, less than June’s 372K. The Unemployment Rate is expected to persist unchanged at 3.6%.
GBP/USD Key Technical Levels
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.
Recommended content
Editors’ Picks
EUR/USD holds below 1.0750 ahead of key US data
EUR/USD trades in a tight range below 1.0750 in the European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
GBP/USD consolidates above 1.2500, eyes on US PCE data
GBP/USD fluctuates at around 1.2500 in the European session on Friday following the three-day rebound. The PCE inflation data for March will be watched closely by market participants later in the day.
Gold clings to modest daily gains at around $2,350
Gold stays in positive territory at around $2,350 after closing in positive territory on Thursday. The benchmark 10-year US Treasury bond yield edges lower ahead of US PCE Price Index data, allowing XAU/USD to stretch higher.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.