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GBP/USD Price Forecast – British Pound on Sharp Uptrend Streak over Hawkish BOE Statement

By:
Colin First
Published: Jun 22, 2018, 12:37 UTC

The pair has been boosted by hawkish BOE

GBPUSD Friday

The British pound rallied significantly during the day on Thursday, reaching above the 1.32 level comfortably, and testing the 1.3250 level in reaction to the statement of the Bank of England being a bit more hawkish than originally anticipated. GBP/USD had a 160-pip bull breakout in European market hours on Thursday’s European market hours after BOE’s chief economist Andy Haldane called for a rate hike and consolidated around 1.325 handle during late North American and early Asian market hours on Friday. The GBP/USD rose as high as 1.3270 and continues to move further uptrend ahead of Friday’s European market hours. Haldane turned hawkish for the first time since joining the monetary policy committee four years ago and that has boosted the odds of a 25 basis point rate hike in August. So, the GBP will likely remain bid.

GBPUSD Higher

Further, the rumors of US-China trade talks could stabilize the risk sentiment in the European and US stocks and the resulting rise in GBP/JPY will likely push GBP/USD higher. If GBP/USD may close today above 1.3270 for the week it will be viewed as signal for a short-term bearish-to-bullish trend change. The only risk to the British Pound stems from the 10-year US-UK bond yield spread, which continues to rise in the USD-positive manner despite Haldane’s hawkish vote. Mark Carney said the Bank of England needs to adapt to the unprecedented changes in the global economy and the financial system as he unveiled another overhaul of the institution’s powers. Under a new framework outlined Thursday, the U.K. Treasury will pump 1.2 billion pounds ($1.6 billion) of capital into the BOE, which in turn will have the ability to take on greater risk if it needs to act to keep the banking system and the economy on an even keel.

GBPUSD Hourly
GBPUSD Hourly

The BOE will now be able to take more risk onto its balance sheet, but also gives it more leeway to support commercial banks and the economy when interest rates are close to zero. In effect, it gives the central bank another permanent tool to reduce financial instability. This has caused hawkish influence in favor of British Pound to greatly increase further which can be viewed as another factor for Sterling’s upward spike along with BOE chairman’s comment on rate hike. Moving forward, expected support and resistance for the pair are at 1.3290 / 1.3320 and 1.3211 / 1.3175 respectively.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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