Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2845.
- Add a stop-loss at 1.2680.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2745 and a take-profit at 1.2680.
- Add a stop-loss at 1.2850.
The GBP/USD price drifted upwards after the latest UK consumer price index (CPI) data. The pair rose to a high of 1.2770, which was higher than this week’s low of 1.2693. The focus shifts to the upcoming interest rate decision by the Bank of England.
Bank of England rate decision
The UK economy is going through a difficult period. Data published on Wednesday showed that the country’s inflation rose at a faster pace than expected in May. According to the Office of National Statistics (ONS), the headline consumer inflation rose by 0.7% in May, leading to a YoY increase of 8.7%. This increase was higher than the median estimate of 0.5% and 8.4%, respectively.
Most importantly, core inflation, which excludes the volatile food and energy products, rose from 6.8% in April to 7.1% in May. It rose by 0.8% during the month, higher than the expected 0.6%. As a result, the country’s inflation is significantly above the Bank of England’s target of 2.0%. On a positive side, the producer price index retreated during the month.
Meanwhile, additional data showed that the country’s public debt jumped in May. In total, public debt jumped by 19.2 billion pounds, pushing the debt-to-GDP ratio to rise above the 100% level for the first time since 1961.
The next important GBP/USD news will be the upcoming interest rate decision by the Bank of England (BoE). Economists expect the bank to diverge from the Federal Reserve by hiking interest rates by 0.25% to 4.75%.
The pair will also react to important statements by Federal Reserve officials like Jerome Powell, Loretta Mester, and Tom Barkin. In his testimony on Wednesday, Powell reiterated that the bank still has work to do to fight inflation.
GBP/USD technical analysis
The GBP/USD pair made a bullish breakout above 1.2676 on June 15th. This was an important level since it was the upper side of the cup and handle pattern shown in purple. The pair retested this level on Tuesday. It has remained above the 25-period and 50-period exponential moving averages while the Relative Strength Index (RSI) has moved below the neutral point at 50.
The pair has also formed a small hammer pattern. Therefore, there is a likelihood that the pair will continue rising as buyers target the year-to-date high of 1.2845.
Ready to trade our free daily Forex trading signals? We’ve shortlisted the best UK forex broker in the industry for you.