Top Forex Brokers
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2950.
- Add a stop-loss at 1.2800.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2830 and a take-profit at 1.2765.
- Add a stop-loss at 1.2920.
The GBP/USD exchange rate was muted on the first day of the month as traders waited for the upcoming Bank of England (BoE) interest rate decision. It held steady at 1.2857, higher than last week’s low of 1.2767.
Focus on the BoE decision
The GBP/USD exchange rate reacted mildly to the relatively positive UK mortgage numbers. In a report, data revealed that the net mortgage approvals rose to 54,700 in June from 51,100 in the previous month. Further, net borrowing by consumers rose to 1.7 billion pounds in June, the highest level since 2018.
These numbers sent a signal that the British economy is still resilient despite the hiking cycle by the Bank of England. The bank, like its other global peers, has been hiking interest rates in a bid to lower inflation, which has remained stubbornly high. The most recent report showed that the headline consumer price index (CPI) fell to 7.9% in June.
The most important catalyst for the GBP/USD pair this week will be the upcoming interest rates decision by the Bank of England. I suspect that the bank will deliver another 0.25% hike like the Fed and the European Central Bank did last week.
There is also a high possibility that the bank will point to a pause of interest rate hikes as it tries to engineer a soft landing for the UK economy. Recent numbers have showed that the country’s economy has held quite well in the past few months.
With the BoE decision scheduled for Thursday, the impact of Tuesday’s manufacturing PMI and house price index (HPI) will be limited. Economists expect the data to show that home prices dropped by 3.8% YoY and by 0.2% MoM.
GBP/USD technical analysis
The GBP/USD exchange rate was hovering at an important level on Tuesday morning. This price coincides with the highest point on June 16th and the Woodie pivot point. The pair is also slightly below the 25-period and 50-period moving averages and is above the ascending trendline shown in black.
It has also formed what looks like a small bullish flag pattern, which is usually a bullish sign. Therefore, the pair will likely remain in this consolidation phase on Tuesday as traders wait for the BoE decision. A bullish breakout will see it rise to the next resistance point at 1.2925.
Ready to trade our free trading signals? We’ve made a list of the best UK forex brokers worth using.