GBP/USD Forecast: Bulls maintain the pressure, aim for 1.2700 and beyond
GBP/USD Current price: 1.2634
- Stubbornly hawkish Bank of England officials gave the British Pound a boost.
- Hopes the Federal Reserve is done with rate hikes weigh on the US Dollar.
- GBP/USD trades near a fresh multi-month high, retains its bullish tone.
The British Pound retains its strength against the US Dollar, with GBP/USD comfortably trading above the 1.2600 threshold after peaking on Monday at 1.2644, its highest since last August. On the one hand, the GBP benefited from hawkish comments from Bank of England (BoE) officials. On the other hand, the US Dollar stays on the back foot amid speculation the Federal Reserve (Fed) is done with rate hikes and will soon move in the opposite direction.
BoE Governor Andrew Bailey said on Monday that bringing inflation down to the 2% target will be hard work. The central bank lifted rates to 5.25% between 2022 and 2023, and Bailey acknowledge the negative impact higher rates have on households, yet added that it is too early to think about rate cuts. Inflation in the United Kingdom (UK), as measured by the Consumer Price Index (CPI), stood at 4.6% YoY in October, more than doubling the central bank’s comfort level. Finally, it is worth adding that policymakers expect inflation to return to 2% by the end of 2025.
On Tuesday, BoE Deputy Governor Dave Ramsden noted UK inflation is primarily homegrown and added the monetary policy will need to be restrictive for an extended period of time. He also said that while the local economy has been more resilient than expected throughout 2023, it is clear that monetary policy will bear down on growth.
Data-wise, the UK macroeconomic calendar is mostly light this week. The country published the October BRC Shop Price Index, which printed at 4.3% YoY, improving from 5.2% in the previous month.
GBP/USD short-term technical outlook
GBP/USD is up for a fourth consecutive day, preserving its bullish strength. It trades a handful of pips below the aforementioned multi-month high, and the daily chart shows it keeps moving away from all its moving averages. The 20 Simple Moving Average (SMA) heads firmly north below the longer ones, reflecting solid buying interest. Technical indicators, in the meantime, have partially lost their bullish momentum, as GBP/USD remains below the weekly high but develops near overbought readings, falling short of suggesting an upcoming slide.
In the near term, and according to the 4-hour chart, GBP/USD is neutral-to-bullish. The pair stands well above all its moving averages, with the 20 SMA accelerating north far above the longer ones. Technical indicators, however, lack directional strength, although they stand within positive levels, in line with another leg north on a break above 1.2645.
Support levels: 1.2605 1.2570 1.2525
Resistance levels: 1.2645 1.2690 1.2730
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Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
