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British Pound (GBP) Latest: GBP/USD Still Firm Ahead of BoE Decision on Policy

British Pound (GBP) Latest: GBP/USD Still Firm Ahead of BoE Decision on Policy

Martin Essex, MSTA, Analyst

GBP price, Brexit news and Bank of England policy decision

  • GBP/USD continues to strengthen, with the 1.36 level now in sight.
  • The Bank of England announces its decision on UK monetary policy at 1200 GMT and is unlikely to make any material changes.
  • Looking ahead, GBP will likely remain highly responsive to any news headlines suggesting an EU-UK trade deal is close to agreement or that the two sides are failing to make progress.

GBP/USD heads towards 1.36 level

GBP/USD traders seem to have the 1.36 level in sight as a possible target after this week’s advance in the pair. That strength has been due largely to growing optimism that the EU and the UK can reach an agreement on trade before the new year, when the Brexit implementation period ends.

However, the pair remains vulnerable to news headlines suggesting the gap between the two sides is narrowing or widening – and any suggestion that it’s widening could send GBP/USD back towards 1.35 in short order.

GBP/USD Price Chart, One-Hour Timeframe (December 9-17, 2020)

Latest GBP/USD price chart.

Source: IG(You can click on it for a larger image)

BoE monetary policy statement

This session’s main event will be the announcement by the Bank of England of the decisions made by its monetary policy committee at this week’s meeting, the last of 2020. The MPC will likely have decided on no major changes to its monetary policy settings while the wrangling on a trade deal continues.

Note that while the persistent strength of GBP/USD might be expected to concern the BoE, that concern will be tempered by the relative lack of progress by GBP against a basket of currencies of its major trading partners. That can be seen in the chart below of the Bank’s effective exchange rate index for Sterling (January 2005 = 100).

GBP Index Price Chart, (January 2019 – December, 2020)

Sterling exchnage rate index.

Source: Bank of England

You can find a forex trader’s guide to the Bank of England here

We look at currencies regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.