Bearish View
Sell the GBP/USD and set a take-profit at 1.3600.
Add a stop-loss at 1.3750.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.3700 and a take-profit at 1.3750.
Add a stop-loss at 1.3650.
The GBP/USD price was little changed as investors reacted to the Fed decision and waited for the coming decision by the Bank of England (BOE). The pair is trading at 1.3667, which was slightly higher than last Friday’s low of 1.3608.
Bank of England Decision
The Federal Reserve was the main catalyst for the GBP/USD in the overnight session. The bank did what most analysts were expecting. It left interest rates at a record low and started to taper its asset purchases. Precisely, it started to taper by about $15 billion per month.
If this pace continues, it means that the central bank will end quantitative easing in the June next year. The bank also said that interest rate hikes will start rising after the QE ends. Therefore, there is a likelihood that it will hike in the third or fourth quarter of 2022.
Looking ahead, the next key mover for the GBP/USD pair will be the interes rate decision by the Bank of England. The bank is expected to conclude its meeting later today. Analysts expect that the bank will decide to leave interest rates unchanged. At the same time, it will likely start slowing its giant QE program.
The BOE decision comes at a time when the UK economic recovery is gathering pace. Inflation has soared while the unemployment has been in a downward trend. At the same time, the services and manufacturing sectors are doing well. And data published on Wednesday showed that the country’s home prices have been at elevated levels.
In addition to the Federal Reserve, other central banks that have adopted a tightening policy are the Reserve Bank of New Zealand (RBNZ), Bank of Canada (BOC), and Norges Bank. The GBP/USD pair will next react to the upcoming US jobs data.
GBP/USD Forecast
The GBP/USD made some modest recovery this week after it declined sharply on Friday. It moved to a high of 1.3700. This was an important price because it was along the lower side of the descending channel shown in black. Therefore, it can be said that the pair formed a break and retest pattern, which is usually a bearish sign.
The pair is slightly below the 25-day and 50-day moving averages while the MACD remains below the neutral line. Therefore, the pair will likely resume the downward trend after the BOE decision.
