- Powell defied market expectations, dashing hopes for an early Fed rate cut in March.
- Investors were looking forward to the BoE’s policy meeting later today.
- The pound remains one of the best performers against the dollar this year in the G10.
The GBP/USD forecast revealed a bearish outlook as the pound lost strength, succumbing to a relentless rise in the dollar. At the FOMC’s policy meeting a day earlier, Powell defied market expectations, dashing hopes for an early Fed rate cut in March. Furthermore, investors were eagerly awaiting the BoE’s policy meeting later today.
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The Fed kept interest rates on hold yesterday. Moreover, Powell stated that they will not start cutting rates until they are confident that inflation is falling to the 2% target. Accordingly, bets for a March rate cut fell to 38% from 59% before the policy meeting.
Meanwhile, investors will be looking for hints on when UK interest rates will start to fall at today’s BoE policy meeting. Significantly, the pound remains one of the best performers against the dollar this year in the G10. The British economy has recovered this year, and inflation remains relatively high. The S&P Global PMI report released earlier this year showed business activity at its highest level in seven months. Therefore, the BoE is likely to keep interest rates unchanged. Additionally, investors expect the first rate cut to come in June.
Namely, after the December data on inflation in Great Britain, the markets reduced expectations about the number of BoE rate cuts this year from 125 to 100 basis points.
There was no guidance from BoE policymakers on the possible outcome of today’s policy meeting. Therefore, analysts believe that Thursday’s decision and message could cause a lot of volatility in the pair.
GBP/USD key events today
- BoE monetary policy meeting
- BoE Governor Bailey speaks
- US unemployment claims
- ISM manufacturing PMI
GBP/USD Technical Forecast: Price is falling in a bearish channel
The pound is falling in a bearish channel on the charts after failing to break the key resistance level of 1.2760. Furthermore, indicators on the chart support a bearish bias as the 30-SMA is above the price, while the RSI is in bearish territory below 50.
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Price dropped to retest channel support. At this support, bulls could emerge to retest channel resistance before the decline continues. However, if the bearish momentum is strong, the price could break through the channel support to retest the key support level of 1.2600.
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