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British Pound (GBP/USD) Forecast – Will the BoE Go Hard This Thursday?

British Pound (GBP/USD) Forecast – Will the BoE Go Hard This Thursday?

Nick Cawley, Strategist

GBP/USD - Prices, Charts, and Analysis

  • Bank of England may hike by 50 basis points on Thursday.
  • Sterling needs some support to reinforce its recent strength.
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The latest Bank of England (BoE) monetary policy decision will be announced on Thursday with the markets currently undecided if the Bank Rate will be raised by 25 or 50 basis points, from its current level of 1.25%. At the last meeting, six out of the nine MPC members voted for a 25 bp hike, while the other three called for a larger, 50 bp increase. In the May MPC report, inflation was seen hitting double figures in Q4 2022 before falling, the labor market was expected to tighten further, while growth was seen slipping lower. The BoE will need to factor in these hard data, consider the amount of imported inflation via a weak Sterling complex, and make a choice. A 50 basis point rate hike on Thursday would send a strong message to the market that the central bank is doubling down on inflation.

The ongoing leadership contest for the keys to No. 10 Downing Street currently shows Liz Truss as the favorite to be the next Conservative Leader and Prime Minister. Ms. Truss has recently taken a few shots at the BoE, suggesting that she would, if elected, look at a review of the central bank’s policy remit to make sure that it is being tough enough on inflation. The Bank of England has been independent of government control since 1997.

For all market-moving economic data and events, refer to the DailyFX calendar

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GBP/USD is changing hands around the 1.2070 level, around three big figures above its July 14 nadir. The recent series of higher lows and higher highs remain in place, while the 20-day sma is providing support. If the pair can break and close above the 50-day sma, then GBP/USD may look to push higher.

GBP/USD Daily Price Chart – July 29, 2022

Retail trader data show 69.27% of traders are net-long with the ratio of traders long to short at 2.25 to 1. The number of traders net-long is 4.73% higher than yesterday and 11.19% lower from last week, while the number of traders net-short is 14.71% lower than yesterday and 4.95% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

GBP/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 0% -1% 0%
Weekly 3% 5% 4%
What does it mean for price action?
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What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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

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