GBP/USD Consolidation Phase
The GBP/USD pair has transitioned into a consolidation stage, having recently come up against the 1.2200 barrier. As the Bank of England’s (BoE) ‘Super Thursday’ looms, Pound Sterling bulls are hitting pause, bracing themselves for the impending policy announcements.
GBPUSD Daily Chart
Following a slight increase last week, the Pound Sterling retraced its steps against the US Dollar, setting a three-week low for the GBP/USD below the 1.2100 mark. The near-term technical outlook for GBP/USD remains biased towards sellers as traders gear up for a pivotal week for central banks.
Recent Market Dynamics
Wednesday witnessed an upswing in bullish momentum for the GBP/USD, which logged gains after falling below 1.2100 earlier in the day. The pair continued its climb toward 1.2200 on Thursday, but momentum waned as investors held off on sizeable positions ahead of the BoE’s monetary policy announcements.
As anticipated, the Federal Reserve kept the policy rate steady at 5.25%-5.5% on Wednesday. Despite Fed Chairman Jerome Powell not ruling out another rate hike in December, he fell short of convincing the markets. Consequently, the benchmark 10-year US Treasury bond yield dropped nearly 4% on the day, and the US Dollar weakened against its main rivals, paving the way for the GBP/USD to rally.
BoE Monetary Policy Outlook
The BoE is projected to maintain the key rate at 5.25% for the second consecutive meeting. Investors will be closely examining revised projections and the statement’s language to gauge whether the BoE has concluded its tightening cycle.
BoE Governor Andrew Bailey is set to host a press conference to present the Monetary Policy Report and field questions from the media. If Bailey signals that they will hold the policy rate at 5.25% due to a deteriorating economic outlook and softer inflation, the Pound Sterling may face selling pressure. On the other hand, if Bailey takes on a hawkish stance by emphasizing heightened inflation risks amid the Middle East conflict, the GBP/USD could regain its footing.
Anticipating BoE Event
In the run-up to the BoE event, analysts at TD Securities stated, “The forward guidance will likely be softened a bit, in light of the weaker economic outlook – signaling a pretty high bar for further hikes.” They added, “A dovish hold by the BoE will weigh on the GBP especially versus peers where the growth-inflation outcomes don’t look as weak.”
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