- For three consecutive trading sessions, the price of the GBP/USD currency pair is trying to rebound to the upside, but its gains did not exceed the resistance level of 1.2740, and the rebound came after the currency pair collapsed towards the support level of 1.2591.
- The first half of 2023 coincided with a shift in attitude at the BoE from dovish to more assertive in light of persistent inflation.
- In this regard, Barclays Bank said that “The recent sudden rise by the Bank of England’s Monetary Policy Committee by 50 basis points indicates a more proactive (long overdue) stance against inflation.”
Analysis from NatWest Markets suggests some caution as GBP is likely to only be supported in this higher interest rate environment provided growth remains strong. Thus, a higher interest rate but lower growth environment will not be supportive of the British currency's valuation, which is what analysts at the bank feel are in the second half. More recently, opinion polls conducted in June revealed that British consumer confidence continued to improve, with the much-interested GfK reading showing improvement for the fifth month in a row. Meanwhile, Lloyds Bank's business barometer revealed business confidence rose to a 14-month high in June.
About the expected for the pound sterling in the coming period, the Sterling is on a strong run, says Barclays Goldman Sachs, which could extend to outperformance in July. It has found some life after a lackluster start to July, and forex analysts say this month could see the British currency continue to benefit from higher UK interest rates.
UK two-year bond yields are proving an attractive proposition for yield-hungry international investors as they remain close to their highest level since 2008 as markets move into the price of higher BoE rates. Sterling was the best-performing major currency in the first half of 2023 as it advanced in value against the entire G10 currency field amid better-than-expected economic performance in the UK and higher interest rates in the Bank of England.
“We think the pound should outperform as real prices need to rally,” said Michael Cahill, forex analyst at Goldman Sachs.
However, a weekly currency research report from analysts at Barclays Bank maintains a positive outlook on the pound as higher interest rates in the UK are expected to support global investor demand for British assets.
GBP/USD Technical Outlook
According to the performance on the daily chart below, the GBP/USD currency pair's attempts to rebound upwards still lack momentum, and a move toward the 1.2840 resistance level may be important for the bulls' return to control, and thus increases the talk about the psychological 1.3000 resistance level.
Over the same period of time, if the currency pair returns to move below the 1.2575 support level, hopes for an upward correction will evaporate. The sterling-dollar currency pair will be affected today by the announcement of the reading of the British Services PMI, then the most important reaction event from the announcement of the content of the minutes of the last meeting of the US Federal Reserve.
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