GBP/USD Giving Bullish Signs As It Breaks Above MAs
GBP/USD has been declining since July but after consolidating in October it might be turning bullish, pushing above moving averages. Buyers have also pushed the price above 1.22, so it seems that this pair doesn’t want to fall below 1.20.
GBP/USD has been in a negative trend since July, but it is showing indications of turning upward after sellers failed to breach below the 1.20 mark. Buyers have taken control, pushing the price over 1.22 and above moving averages as well. The rise in US bond rates as a result of global concerns has boosted the USD, but this week we have seen a retreat to 4.60% after the 10-year notes moved above 5% last week.
This pair had been sliding for months, reaching 1.2040 in early October before recovering. The USD has been supported and pushed higher by economic data, with the pair sliding just below 1.21 earlier this week, while moving averages have acted as resistance, driving the highs lower. Although after consolidating for most of October, this pair is giving signals that it wants to turn higher again.
The GBP rose as the BOE raised its inflation projection by a smidgeon while brushing aside concerns to the economy for the time being (despite if its GDP forecasts suggest more economic hardship). Aside from that, the continuous votes in favor of rate rises by three officials show some transparency that there is evidence for additional tightening.
So, the prospect of another 25 basis point rate rise is still alive or at least, the options are still open. Aside from that, I don’t see much else to question about their decision. They stated that it is “much too early” to consider rate reduction, thus it appears to be a hawkish hold on the margin.
November Monetary Policy Decision from the Bank of England
- BOE leaves bank rate unchanged at 5.25% as expected
- Prior bank rate was 5.25%
- Bank rate vote 3-6 vs 3-6 expected (Greene, Haskel, Mann voted to raise by 25 bps)
- Policy likely needs to be restrictive for extended period of time
- Will continue to monitor closely inflation persistence and resilience in the economy as a whole
- Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures
- Estimates UK GDP flat for Q3 2023 (previously +0.1%)
- Estimates UK GDP to be +0.1% in Q4 2023
- Inflation well above target of 2% but expected to continue to fall sharply
- Market participants had reported an increasing conviction that UK policy rates would remain ‘higher-for-longer’
- Some business surveys are pointing to a fall in GDP in Q4 2023
- But more forward-looking indicators were less pessimistic about growth prospects
- Full statement
GBP/USD Live Chart
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