GBP/USD Gains Ground Ahead Of BoE Decision

Key Insights

• The Fed raised the interest rate from 0.25% to 0.5% and signaled that it will start to reduce the size of its balance sheet.
• Today, traders will focus on the BoE Interest Rate Decision and the subsequent commentary.
• A move above 1.3175 will push GBP/USD towards the resistance at 1.3200.

British Pound Stays Strong Against U.S. Dollar

GBP/USD is currently trying to settle above the resistance at 1.3175, while the U.S. dollar is flat against a broad basket of currencies.

The U.S. Dollar Index is testing the support level at 98.35. In case the U.S. Dollar Index manages to settle below this level, it will head towards the next support at the 98 level, which will be bullish for GBP/USD.

Yesterday, the Fed raised the interest rate from 0.25% to 0.5% and changed its economic projections. The Fed’s GDP growth forecast for 2022 was changed from 4% to 2.8%, while the expectation for the federal funds rate at the end of this year was changed from 0.9% to 1.9%. In addition, the Fed noted that it would start to reduce the size of its balance sheet at a coming meeting.

The were no major surprises in Fed’s projections and commentary, and the U.S. dollar lost some ground after the release of the Fed’s statement. Today, foreign exchange market traders will focus on the BoE Interest Rate Decision. Analysts expect that the rate will be raised from 0.5% to 0.75%. As usual, the Bank’s commentary may have a significant impact on GBP/USD dynamics.

Technical Analysis

GBP/USD is moving towards the resistance level at 1.3175. In case GBP/USD manages to settle above this level, it will head towards the next resistance, which is located at 1.3200.

A successful test of the resistance at 1.3200 will open the way to the test of the resistance at the 20 EMA at 1.3215. If GBP/USD gets above this level, it will head towards the resistance at 1.3230.

On the support side, a move below 1.3140 will push GBP/USD towards the support level at 1.3110. In case GBP/USD gets below this level, it will head towards the support level at 1.3080. A successful test of this level will open the way to the test of the support at 1.3050.

For a look at all of today’s economic events, check out our economic calendar.