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- The Bank of England will likely maintain its borrowing costs at a 15-year high.
- A BoE rate cut is not fully factored in until September 2024.
- Signs of a slowdown in a significant portion of the British economy have become more evident.
The GBP/USD forecast shows a glimmer of bullish optimism as the Bank of England meeting looms. The Central Bank will likely maintain its borrowing costs at a 15-year high. Still, it might convey its intent to refrain from cutting rates in the foreseeable future as inflation remains high.
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Meanwhile, market expectations indicate a nearly 90% probability that the BoE will maintain its rates. However, a rate cut is not fully factored in until September 2024, well after such cuts are expected to begin on the continent.
“Pricing reflects the belief that BoE rates will need to remain elevated for several months due to the UK’s inflation risks,” stated Rabobank FX strategist Jane Foley. Meanwhile, the European Central Bank and the Fed both kept their rates unchanged as they monitored inflation.
On the other hand, the BoE’s Monetary Policy Committee faces an inflation rate that is more than double that of the Eurozone and nearly twice the US rate. In September, the committee narrowly voted 5-4 to halt the consecutive rate increases. However, since then, signs of a slowdown in a significant portion of the British economy have become more evident. Consequently, some economists suggest that a recession might already be underway.
Notably, BoE Governor Andrew Bailey and other senior officials at the central bank have acknowledged that their previous rate hikes have weighed on the economy. Nevertheless, they have underscored their commitment to the task of taming inflation.
GBP/USD key events today
Some of the significant events that might move the pound today include:
- The Bank of England monetary policy meeting.
- The US initial jobless claims report.
GBP/USD technical forecast: 1.2200 resistance breakout likely.
On the charts, the pound is bullish as it trades above the 30-SMA, with the RSI in bullish territory. Moreover, the price trades between the 1.2100 support and the 1.2200 resistance levels. It is currently nearer the resistance level than the support.
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Although the price has paused at the 1.2200 resistance, there’s solid bullish momentum, which might lead to a break above. Consequently, the price will likely climb to the 1.2275 resistance level.
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