POUND STERLING OUTLOOK: GBP/USD PRICE ACTION IN FOCUS AS BANK OF ENGLAND RATE DECISION & INFLATION REPORT LOOM
- GBP/USD price action hinges largely on high-impact event risk like the BoE decision on deck
- The Pound Sterling could continue its bullish trend if the Bank of England defers NIRP remarks
- US Dollar remains in the hot seat with the Greenback hovering around two-year lows
GBP/USD is gaining ground on Wednesday on the back of more broad-based US Dollar weakness. The USD has been getting decimated recently as the US Dollar Index tumbles to two-year lows. That said, spot GBP/USD price action looks ripe for potential currency volatility later as forex traders turn to the second half of the week.
This is considering high-impact event risk that hangs over the Pound-Dollar, including an expected BoE decision and release of non-farm payrolls data. Detailed on the DailyFX Economic Calendar, the Bank of England is expected to release its monetary policy update Thursday, August 06 at 6:00 GMT.
GBP/USD PRICE CHART: DAILY TIME FRAME (04 MAY TO 05 AUG 2020)
The British Pound could react violently to any changes in language by the BoE Monetary Policy Committee regarding negative interest rate policy or the central bank’s current pace of quantitative easing. Weekly US jobless claims data, a leading labor market indicator, is due later on Thursday at 12:30 GMT. Employment figures released earlier in the week could set the tone for NFPs slated to cross market wires on Friday, August 07 at 12:30 GMT, and potentially weigh heavily on GBP/USD price action as well.
On that note, one-week and overnight implied volatility measures for GBP/USD have ticked higher recently as forex traders anticipate the possibility of elevated market activity around aforementioned event risk. Statistically speaking, an options-implied trading range of technical support and resistance is estimated to contain spot price action 68% of the time for the given duration.
-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
