Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2775.
- Add a stop-loss at 1.2700.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a stop-loss at 1.2685.
- Add a stop-loss at 1.2775.
The GBP/USD pair reacted mildly to Wednesday’s UK inflation data and Federal Reserve interest rate decision. The pair rose slightly to 1.27500 as the focus now shifts to the upcoming Bank of England (BoE) interest rate decision.
BoE rate decision ahead
The GBP/USD pair moved sideways after the UK published an encouraging inflation report. According to the Office of National Statistics (ONS), the headline Consumer Price Index (CPI) rose by 3.4% in February, lower than the expected 3.5%. This was the lowest annual inflation growth rate since 2021.
Core inflation, excluding important food and energy prices, rose by 4.5% after rising by 5.1% in the previous month. These numbers mean that the country’s inflation is heading in the right direction as energy prices retreat.
The next crucial event to watch will be the upcoming Bank of England (BoE) interest rate decision. Economists expect that the BoE will decide to leave interest rates unchanged now that inflation is falling. It will also estimate that it will cut rates by about three times this year.
The GBP/USD pair held steady after the Federal Reserve delivered its second interest rate decision of the year. In a statement, the Fed decided to leave rates at a 23-year high of between 5.25% and 5.50%.
The bank also hinted that it will deliver three rate cuts this year, with the rates market expecting the first cut will happen in June. It is still waiting for greater confidence that inflation is moving to the 2% target.
The other important thing that the Fed changed was that it expected that the economy would grow at a faster pace this year and in 2025.
The market welcomed the Fed decision, with American equities rising to their all-time highs. Bond yields also retreated, with the two-year falling to 4.62%.
GBP/USD technical analysis
The GBP/USD pair tilted upwards after the Federal Reserve decision. It has remained above the ascending trendline, which connects the lowest swings since February 14th. Still, the pair remains below the 50-period moving average and the Ichimoku Cloud indicator.
The two lines of the MACD have crossed each other and are pointing upwards. It also retested the first support of Andrew’s pitchfork tool. Therefore, the pair will likely continue rising as buyers target the key resistance point at 1.2775, its highest swing on February 2nd.
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