GBP/USD buyers flirt with the weekly top, up 0.07% intraday around 1.3160 as traders await the Bank of England’s (BOE) interest rate decision on early Thursday.
The cable pair cheered broad US dollar weakness to print a bullish breakout of the short-term falling wedge. However, mixed sentiment in the market and anxiety ahead of the BOE seems to probe the quote’s further upside of late.
The US Dollar Index (DXY) dropped the most in a week the previous day, inactive around 98.40 at the latest, despite the Federal Reserve’s (Fed) 0.25% increase to the benchmark rate. The Fed also signaled six such moves during this year but comments suggesting downside risk to inflation going forward by Chairman Jerome Powell seem to have weighed on the greenback.
That said, Kyiv’s rejection of proposed neutrality in the 15-point peace plan and the International Court of Justice’s order to Russia to suspend the invasion of Ukraine challenge sentiment but the continuation of talks and recently easy tone of Moscow keeps markets hopeful. China, on the other hand, offers good support to the sentiment in Asia-Pacific markets due to easy covid numbers and push for more measures to boost the economy in the first quarter (Q1).
Looking forward, the “Old Lady” is up for a hat-trick of a 0.25% increase in the key rate to tame inflation. Earlier in the week, the UK jobs report also favored bulls and hence GBP/USD has further upside to track. However, all this news is mostly priced in and hence a major positive surprise need to keep the buyers on the table.
Other than the BOE, the second-tier US data relating to housing, jobs, and manufacturing will join the risk catalysts to direct short-term GBP/USD moves.
BOE is expected to hike today:
It will be the third consecutive hike today if they do, and that is what markets are expecting. The Ukraine crisis is putting upside pressure on (already hot) inflation, and that has seen expectations for more aggressive hikes from BOE over the coming months. We saw nine votes for a hike in February’s meeting, so to see another nine vote for a hike today along with hawkish comments likely paves the way for another hike in April to take them to a 1% base rate.
GBP/USD rallied to a 5-day high following yesterday’s FOMC press conference, although prices are now trading in a tight range around a key resistance zone.
GBP/USD Long (Buy)
Enter at: 1.3221