Bank of England

GBP/USD remains on a downtrend ahead of the BoE interest rate decision. The event, which is scheduled for Thursday, comes a week after the Fed interest rate decision. Notably, the Fed’s shift in position is largely behind the currency pair’s decline over the past four sessions. After maintaining a dovish tone in the recent past, the US central bank unexpectedly changed its position to a more hawkish stand. It hinted at two rate hikes by the end of 2023.

Investors are now keen on the details of the BoE interest rate decision. The rise of inflation beyond the targeted level has exerted pressure on the UK central bank to begin tightening its monetary policy. In May, consumer prices rose by 2.1% from 1.5% in April. Notably, the price of clothes, eating out, and fuel were among those that surged significantly.

On the part of the greenback, GBP/USD will be reacting to speeches from Jerome Powell and other Fed officials in the course of week. US and UK PMI numbers, as well as the US GDP and sales from the housing sector will also impact the pair.    

GBP/USD technical outlook

GBP/USD is up by 0.11% at 1.3818. The currency pair is on a decline for the fourth consecutive session following last week’s hawkish surprise from the Federal Reserve. After hitting an intraday high of 1.4133 on last week Monday, it plunged to an intraday low of 1.3793 on Friday. In the week, the pair is struggling to rebound as it seesaws at 1.3800. On a four-hour chart, it is trading below the 5 and 10-week exponential moving averages.

I expect GBP/USD to be range bound between 1.3800 and 1.3900 ahead of the BoE interest rate decision. Depending on the outcome of this week’s key events, a move past the borders of this horizontal channel will place the support and resistance levels at 1.3700 and 1.4000 respectively.

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