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British Pound (GBP/USD) Remains Pressured as Key Central Bank Decisions Near

British Pound (GBP/USD) Remains Pressured as Key Central Bank Decisions Near

Nick Cawley, Strategist

GBP/USD - Prices, Charts, and Analysis

  • Is the Fed looking at 75bps or 100bps?
  • The BoE will likely hike by 50 basis points.
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Cable may have a large shock of volatility next week when both the Federal Reserve (Fed) and the Bank of England (BoE) announce their latest monetary policy decisions. The Fed is expected to announce another 75 basis point rate hike next Wednesday but a 100bp hike cannot be ruled out, especially after last week’s US inflation release. The BoE is expected to raise rates by 50bps next Thursday although a 75bp hike cannot be discounted. Depending on the outcome of both meetings, the rate differential between the two currencies could either stay the same or widen by up to 50 basis points. If the UK/US rate differential widens further, cable is likely to trade back below 1.1500.

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

This week’s disappointing US CPI report sent risk markets tumbling and US Treasury yields and the US dollar soaring as most risk markets had positioned for a better-than-expected report. The yield on the interest rate sensitive US Treasury 2-year jumped as markets started to price in the possibility of a super-sized 100 basis point increase next week. While this may be an overreaction to Tuesday’s CPI report, Fed chair Jerome Powell may well make the move as inflation remains too high and too sticky.

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Cable currently trades around 1.1500 and the technical outlook remains weak. Last week cable traded at 1.1405, the lowest level since Mach 1985, and this level may be tested again. On the chart, there is very little in the way of support to slow any move lower with 1.1000 a likely landing zone for the pair if the US dollar continues to dominate. Next week’s decisions and commentary by the two central banks will be key for cable in the weeks ahead.

GBP/USD Daily Price Chart – September 15, 2022

Retail trader data show 77.55% of traders are net-long with the ratio of traders long to short at 3.45 to 1. The number of traders net-long is 6.97% lower than yesterday and 8.01% lower from last week, while the number of traders net-short is 21.43% higher than yesterday and 0.79% 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

GBP/USD Bullish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -11% 9% -4%
Weekly -30% 136% -2%
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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