Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3100.
- Add a stop-loss at 1.2850.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2850.
- Add a stop-loss at 1.3100.
The GBP/USD exchange rate continued its strong rally after the March Federal Reserve decision and as traders waited for a more hawkish Bank of England (BoE). The pair surged to the important psychological point at 1.3000, its highest level since November 6 last year.
Hawkish BoE expected
The GBP/USD pair will be in focus on Thursday as the Bank of England delivers its interest rate decision. Economists expect the bank to leave interest rates unchanged at 4.50% as it confronts major headwinds in the UK and abroad.
The UK economy is slowing and it even contracted in January. The UK is also set to implement more taxes that businesses say will affect their operations. At the same time, the world is staring at major geopolitical issues as Donald Trump moves ahead with his tariffs.
The BoE expects that the economy will slow further this year and that inflation may jump to 3.7% because of higher energy prices. Higher inflation and slow economic growth means that the economy will move into a stagflation period.
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The key catalyst for the GBP/USD pair will be how the members vote. Two members dissented in the last meeting, preferring a pause. A sign of more split among the committee will likely have an impact on the pair.
The BoE decision comes a day after the Federal Reserve left interest rates unchanged and warned about a stagflation in the US. Officials warned that the US economy will slow, while inflation will rise because of Donald Trump’s tariffs.
The GBP/USD pair will react mildly to some key economic data like existing home sales, Philadelphia Fed manufacturing index, and initial and continuing jobless claims data. While these numbers are important, their impact on the next Fed actions will be limited.
GBP/USD technical analysis
The GBP/USD exchange rate continued rising, reaching the psychological point at 1.3000, its highest level since November. It bounced back above the 61.8% Fibonacci Retracement level at 1.2925.
The pair has moved above the strong pivot reverse point at 1.2940. Also, the Average Directional Index (ADX) has jumped to 33.7, the highest level since January. A higher ADX is a bullish sign since it is a sign that the pair has the momentum.
The Relative Strength Index (RSI) has moved to the overbought level. Therefore, it will likely continue rising as bulls target the 78.6% retracement point at 1.3150.
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