- The BOE has confirmed its commitment to keeping UK interest rates elevated.
- Bailey said there is still a long way to go in solving the problem of inflation.
- October saw a slowdown in UK wage growth and a 0.3% drop in gross domestic product.
The Bank of England (BOE) is standing firm on its hawkish stance, even as the prospect of a US interest rate cut gains traction, leading to bullish GBP/USD price analysis. On Thursday, the BOE reaffirmed its commitment to keeping UK interest rates elevated for an extended period. In contrast, the Fed has signaled a rate cut in 2024.
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Governor Andrew Bailey announced a 6-3 vote to keep the rate at the 15-year peak of 5.25%. In addition, Bailey said that there is still a long way to go in solving the problem of inflation. Therefore, it went against the expectations of investors who were increasingly betting on a reduction in interest rates. Unlike the Federal Reserve’s indications of a potential rate cut in the United States, the BOE did not discuss rate cuts. On the contrary, it expresses concern that British inflation may be more persistent.
Meanwhile, data this week revealed a slowdown in wage growth and gross domestic product fell 0.3% in October. That raises concerns about a potential recession ahead of expected national elections in 2024. Still, the BOE remained steadfast. As a result, investors revised their expectations for the first rate cut from March to May.
ING economist James Smith noted the BOE’s reluctance to support rate cut expectations. This is a departure from the Federal Reserve’s more proactive stance.
GBP/USD key events today
- UK Flash Manufacturing PMI
- UK Flash Services PMI
- Empire State Index of Production
- US Flash Manufacturing PMI
- US Flash Services PMI
GBP/USD Technical Price Analysis: Potential Pullback as Bullish Momentum Tops
On the technical side, GBP/USD broke above the key resistance level at 1.2700 in a strong bullish rally. As a result, the price left the 30-SMA well below, showing tremendous bullish strength. Similarly, the RSI has risen to the overbought region. However, this can also lead to a pullback as the bullish move is overextended. On the fib tool, the price extended to 1.27 in one move without pauses.
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Moreover, there is resistance just above at the key level of 1.2800. Therefore, a short break would allow the price to retest the 1.2700 level. Moreover, it would allow SMA to catch up on price.
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