Bullish View
- Buy the GBP/USD and add a take-profit at 1.4020 (50% retracement).
- Add a stop-loss at 1.3897.
- Timeline: 1-2 days.
Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.3897.
- Add a stop-loss at 1.4020.
The GBP/USD is rising for the fourth straight day as investors wait for the latest Bank of England (BOE) interest rate decision. It is trading at 1.3965, which is about 1.30% higher than the lowest level last week.
BOE Decision
The BOE will conclude its two-day meeting and publish the outcome later today. Analysts polled by Bloomberg and Reuters expect the bank to leave its interest rate at 0.10%, where it has been in the past few months. The key thing to watch will be the bank’s decision on its 875 billion pound quantitative easing (QE) program. Some analysts expect the bank to signal when it will start tapering while others expect it to have a wait-and-see approach.
The decision comes at an important time for the UK economy. The government announced some lockdown extensions as the Delta variant continues to spread in England. At the same time, higher commodity prices and demand have pushed the overall inflation above the BOE’s target of 2.0%. The rate rose faster than the 1.% predicted by analysts while the BOE expects that it will peak at around 2.5%.
At the same time, analysts expect that the UK economy will rise by 7% this year and outperform the UK and the Eurozone. Data published yesterday showed that the Manufacturing and Services PMIs remained above 50 in June. Further, UK government borrowing has surged. The Office of Budgetary Responsibility said that the government will have a deficit of more than $325 billion this year.
The GBP/USD will also react to a data dump from the US. The country will publish the final estimate of first-quarter economic growth. Analysts expect that the figure will remain the same at 6.4%. Durable goods orders are expected to rise by 2.8% while core durable goods orders expected to rise by 0.8%. The US will also publish the latest initial jobless claims and consumer spending data.
GBP/USD Analysis
The two-hour chart shows that the GBP/USD pair has been on a strong upward momentum this week. The pair is trading at the 38.2% Fibonacci retracement level and moved slightly above the 15-day and 30-day exponential moving averages (EMA). The Relative Strength Index (RSI) has also moved in an upward trend. Therefore, the outlook for the GBP/USD is neutral, with the key levels to watch being the 50% retracement at 1.3965 and the 23.6% retracement at 1.3897.
