GBP/USD Remains Well Supported as the BOE Holds its Ground
The 50 SMA is providing support for GBP/USD
While the attention has been on the USD, on the JPY, and on the Euro this month, the GBP has been the quiet winner behind the curtains, with not many noticing it, despite the UK economy heading lower toward a possible recession. Moving averages continue to keep GBP/USD supported and the BOE meeting is expected to be less dovish than the previous one.
Looking at the daily chart we can see that after this forex pair climbed above 1.25, moving averages turned into support on the daily chart. The 200 SMA (purple) was the first to take up this job, then the 20 SMA (gray) followed and now it’s the 50 SMA (yellow) that is providing support, pushing the lows higher and indicating that buyers are active despite not making new highs for more than a month.
Will the Bank of England Follow the ECB and Accept Rate Cuts?
This comes at a time when the USD has made a comeback and has gained considerable ground against other major currencies. This week we have the first Bank of England (BOE) for 2023, which will be supplemented by the Meeting Minutes, the quarterly Monetary Policy Report (MPR), and an MPC news conference.
They’re expected to keep interest rates on hold, while the MPC votes in favour of cutting rates are expected to decline from 3 to 2 this time. This would be bullish for the GBP, however, traders are also expecting some dovish comments by the BOE. Rate cuts have been out of the question for the BOE, but as we have seen the ECB make a shift in recent weeks, it is likely that the Bank of England will follow through, starting to mention rate cuts too. So, while we may not get a clear indication of an approaching rate decrease, we will hear updated economic estimates that may shed some light on the probability of a move in May. That would be the first test for the GBP.
GBP/USD Live Chart
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