Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3000.
- Add a stop-loss at 1.2700.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2765 and a take-profit at 1.2675.
- Add a stop-loss at 1.2900.
The GBP/USD exchange rate soared to the highest level since April 22nd last year ahead of the upcoming UK economic data and the Bank of England (BoE) interest rate decision. The pair jumped to a high of 1.2822, ~24% above the lowest level in 2022.
Bank of England's decision
The GBP/USD price jumped sharply after the latest interest rate decision by the Federal Reserve. In its decision, the bank decided to leave the interest rate unchanged at 5.25%. It had previously hiked interest rates in the past ten meetings straight.
The pair also reacted to the latest US consumer inflation and retail sales numbers. In a report, data showed that the country’s inflation dropped from 4.9% in April to 4.0% in May. The core CPI dropped to 5.3%, signaling that inflation is still sticky.
On Friday, data showed that the volume of retail sales rose slightly in May, signaling that the consumer is still strong. Retail sales rose by 0.3% in May after rising by 0.4% in the previous month. Spending rose across the board except at gasoline stores.
Looking ahead, the focus among investors will be in the UK, where the Bank of England will deliver its interest rate decision on Thursday. Unlike the Fed, analysts expect the BoE will decide to hike interest rates by 0.25% to 4.75%.
The decision will come two days after the UK publishes its inflation numbers. Economists believe that the headline consumer inflation dropped from 8.7% in April to 8.5% in May. They also expect that the core CPI dropped from 6.8% to 6.7%. These numbers mean that the country’s inflation remained significantly higher than the BoE’s target of 2.0%.
GBP/USD technical analysis
The GBP/USD pair jumped sharply as investors priced in divergence between the Bank of England (BoE) and the Federal Reserve. It managed to cross the important resistance level at 1.2676, the upper side of the cup and handle pattern. The pair moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) moved to the overbought level.
It moved above the Ichimoku cloud. Therefore, the pair will likely continue rising in the near term, as buyers target the key resistance point at 1.3000. In the short term, the pair will likely retest the upper side of the cup and handle pattern.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best UK forex broker in the industry for you.