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Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2450.
- Add a stop-loss at 1.2250.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2220.
- Add a stop-loss at 1.2350.
The GBP/USD price rose slightly after the latest UK jobs and US consumer inflation data. It also rose ahead of the upcoming interest rate decisions by the Federal Reserve and Bank of England. It was trading at 1.2352, which was slightly below this week’s high of 1.2400.
BoE and Fed prepare to downshift
The GBP/USD price rose after the UK published a series of important economic data. On Monday, the country released better-than-expected October GDP data. According to the Office of National Statistics (ONS) showed the economy expanded by 0.5% in October, better than the median estimate of 0.3%. The economy still shrank by 0.3% in the three months to October.
On Tuesday, data by the ONS revealed that the unemployment rate rose slightly to 3.7% while average earnings rose by 6.1%. These numbers revealed that the country’s labor market remained strong in October.
The most important catalyst for the pair was the latest American consumer inflation data. According to the Bureau of Labor Statistics (BLS), the headline consumer inflation data showed that inflation dropped to 7.1% in November while core CPI pulled back to 6.0%. Real earnings, which includes inflation, rose by just 0.2%.
Therefore, these numbers signal that the Fed will start downshifting its interest rate hikes. After concluding its two-day meeting, analysts believe that the bank will hike rates by 0.50% after increasing by 0.75% in the past four meetings.
Still, there is a likelihood that the Fed will sound hawkish because of the falling Treasuries and the US dollar index. Their performance could spur inflation in the coming months.
The GBP/USD price will also react to the upcoming UK inflation data scheduled for Wednesday. Economists expect that the headline CPI dropped to 10.9% while core CPI declined to 6.5%. These numbers will come a day ahead of the BoE decision.
GBP/USD forecast
The GBP/USD price has been in a strong bullish trend in the past few days. It has formed an ascending channel shown in black. It is a few points above the lower side of the channel. On the 4H chart, it moved above the 25-day and 50-day moving averages while the Awesome Oscillator moved above the neutral point.
The outlook for the pair is bullish ahead of the BoE and Fed decision. If this happens, the pair will likely rise to 1.2450.
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