- In the recent trading sessions, the price of the GBP/USD currency pair moved in very narrow ranges that are prominent on the daily chart below.
- Technically, one should beware of a jump in the price of the currency pair in one of the two directions at any time.
- The bulls are trying hard to push the GBP/USD above the 1.2800 resistance, to confirm control of the trend.
- Technical indicators are currently in a neutral position, waiting for a strong move that determines the direction.
Expected performance of the pound sterling
Goldman Sachs expects the pound to remain supported, following last week's decision by the Bank of England to raise interest rates by 50 basis points. Accordingly, Michael Cahill, an expert at Goldman Sachs in London, says, “It is time for the hawks to cry out, and it seems that the Bank of England has done exactly that.”
Financial market analysts have long accused the bank of being too slow to wake up to the threats posed by rising inflation, often arguing that internal projections revealed it would decline as quickly as it rose. Analysts have attributed the conservative stance to contributing to currency weakness for most of 2022. But the Bank of England itself acknowledged last week that “second-round effects on domestic price and wage developments from external cost shocks are likely to take longer to clear than they do to emerge.” "
This change in sentiment set the stage for a larger-than-expected 50bp increase which some analysts said is a sign that the bank has now adopted more proactive measures in an effort to restore credibility. The development appears to have contained the rise in British short-term bond yields, which is the main driver of the higher cost of borrowing - albeit near high levels. Overall, economists at Goldman Sachs are calling for another 50 basis points in August given the continued strong nature of economic data which indicates that any decline in inflation in the near term is unlikely.
Sterling forecast against the dollar today:
There is no change in my technical view of the performance of the price of the GBP/USD currency pair, as the bulls' control will strengthen stability above the resistance 1.2800. It may be the way to move towards the next psychological resistance level 1.3000.
On the other hand, breaking the support levels at 1.2660, 1.2580, and 1.2490 will be important to confirm the trend change to bearish. Today, the currency pair will be affected by the statements of the US Federal Reserve Bank Governor, Jerome Powell, and the statements of the Bank of England Governor.
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