The pair will likely continue falling.
Bearish View
- Set a sell-stop at 1.1885 and a take-profit at 1.1750.
- Add a stop-loss at 1.11950.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.1942 and a take-profit at 1.2050.
- Add a stop-loss at 1.1850.
The GBP/USD pair moved sideways even after the extremely hawkish statement by Andrew Bailey of the Bank of England. It also reacted mildly to the latest American consumer inflation data. It is trading at 1.1900, where it has been in the past few days.
BOE Ready to Do More
The GBP/USD priced remained in a consolidation mode after the hawkish statement by Andrew Bailey. In an interview, he said that the BoE believes that inflation will keep rising in the coming months. He estimated that it will peak at about 11%.
As a result, he appeared to prepare the market for a significantly bigger rate hike when the bank meets in August. Analysts believe that the BoE will do away with its usual 25 basis point hike and deliver either a 0.50% or a 100 basis point increase.
He said that statement on the same day that the UK published strong GDP data. The numbers showed that the country’s economy eked a gain in May this year, helped by the rising doctor visits. Other parts of the economy like manufacturing and industrial production also did well.
By shifting gears from 0.25% hikes, the BoE will be in good company. The Fed has already hiked rates by 0.50% and 0.75%. On Wednesday, the Bank of Canada surprised investors with a 100 basis point hike. The Reserve Bank of New Zealand (RBNZ) also hiked rates by 0.50%.
The GBP/USD pair also reacted mildly to the strong inflation data from the United States. Data by the Bureau of Labor Statistics showed that the country’s inflation jumped by 9.1% in June. As a result, analysts now expect that the Federal Reserve will go big by hiking rates by 100 basis points. The next key data to watch will be the latest producer price index (PPI) data.
GBP/USD Forecast
The GBP/USD pair moved sideways in the overnight session. It is trading at 1.1900, which is slightly above this week’s low of 1.1812. The pair has moved below the important resistance level at 1.1935, which was the lower side of the inverted cup and handle pattern.
It has dropped below the 25-day and 50-day moving averages and is slightly above the first support of the standard pivot point. Therefore, the pair will likely continue falling, with the next key support being at 1.1740, which is the second support of the standard pivot point.
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