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GBP/USD Price Forecast – GBP/USD Slides Downwards Ahead of BOE Rate Decision

By:
Colin First
Published: Jun 21, 2018, 06:54 UTC

The market is a bit ginger on what it should be doing ahead of the BOE decision

GBPUSD Thursday

The GBP/USD is continuing to sink on bearish action into the week’s swing lows. The BOE’s rate call today is guaranteed to be a non-starter, but traders will be keeping an eye out for hints about action in the 3rd quarter. The GBP/USD is continuing to slump in Wednesday’s lows near 1.3140 as the US Dollar gets supported by rebounded US Treasury yields. Thursday’s big event is the Bank of England’s (BOE) rate call, due at 11:00 GMT, and the central bank is widely expected to remain on hold on rates. The BOE was knocked off their hawkish stance recently as a slump in economic figures for the UK’s economy that was expected in the first quarter threatens to slip into the second half of the year.
Market hopes for a rate hike to come in the third quarter have begun to evaporate lately.

Pound Awaits BOE

Some analysts believe the MPC would keep policy on hold and shy away from comments about market expectations of future rate hikes. However any comments from BOE members about 2018 Q1 macro data that suggests the soft data to be temporary would be interpreted as a signal for rate hike in August 2018. Currently the GBPUSD pair has hit new 2018 lows and is trading near the range of Mid-November 2017. The only major bullish influence that the British pound faced in recent times was when British Prime Minister Theresa May won a crucial Brexit vote in parliament, averting a rebellion that could have undermined her authority, however the momentum from same has long since disappeared.

GBPUSD Hourly
GBPUSD Hourly

The dollar index is currently seeing slight upward movement spurred by positive momentum in US Greenback against major global currencies. This upward movement of US dollar is supported by increase in US Treasury yields propped up by remarks from Federal Reserve Chairman Jerome Powell who commented yesterday that the U.S. central bank should continue with a gradual pace of rate increases which supports investor’s belief of multiple rate hikes this year. On release front U.S market will see Philadelphia Fed Manufacturing Index and Initial Jobless claims data while UK market will see interest rate decision and monetary policy meet proceedings update. Expected support and resistance for the pair are at 1.3145 / 1.3110 / 1.3070 and 1.3215 / 1.3250 / 1.3280 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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