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British Pound (GBP) Price Outlook: GBP/USD Edging Higher Ahead of BoE

British Pound (GBP) Price Outlook: GBP/USD Edging Higher Ahead of BoE

Martin Essex, MSTA,

GBP price, news and analysis:

  • GBP/USD is continuing its modest climb higher that began a fortnight ago, and could hit the psychologically important 1.40 level soon.
  • That, though, is dependent on the Bank of England’s monetary policy committee sounding hawkish when it announces its latest decisions Thursday.
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GBP/USD waiting for Bank of England

GBP/USD continues to advance modestly, extending the rise that began on July 20 when the pair hit a recent low at 1.3572. The clear near-term target remains the psychologically-important 1.40 level, and Thursday’s announcements by the Bank of England’s monetary policy committee could prove to be the catalyst for that level to be reached and perhaps breached.

When the MPC reports, the focus will be on whether it drops any hints that a monetary policy tightening is on the way, either through a reduction of its asset purchases or even through higher UK interest rates. Note that it will not actually change any of its settings tomorrow but it could begin to warn the markets that a tapering of its assistance program is now being considered – a positive for GBP/USD.

GBP/USD Price Chart, Hourly Timeframe (July 20 – August 4, 2021)

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

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To the downside, if the BoE shrugs off stronger UK inflation and economic growth, there is support at 1.3840 from the downward sloping trendline shown on the chart above that previously acted as resistance and is now supporting the price.

As for the US Dollar, that side of the equation is also relatively stable Wednesday, with traders waiting for Friday’s US labor-market report. Forecasters polled by the financial news agencies are predicting an increase of 880,000 in non-farm payrolls in July, up from the previous 850,000.

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--- 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.

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