Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2525.
- Add a stop-loss at 1.2365.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2400 and a take-profit at 1.2300.
- Add a stop-loss at 1.2500.
The British pound held quite well on Wednesday and Thursday after a series of strong economic data from the UK. The GBP/USD price rose to a high of 1.2470, which was slightly higher than this week’s low of 1.2358. Sterling also jumped against other currencies like the euro and the Swiss franc.
Bank of England pressured
Economic data published this week showed that the Bank of England is under pressure to keep hiking rates as the country goes through stagflation. On Tuesday, data by the Office of National Statistics (ONS) revealed that the labor market is strong as wage growth accelerated.
Additional data published on Wednesday caught many analysts by surprise as inflation remained at an elevated level in March. The headline consumer price index rose by 0.8% in March, higher than the expected increase of 0.1%.
On a year-on-year basis, inflation remained above 10% in March as it rose by 10.1%. Core inflation rose by 0.9% and 6.2% on a MoM and YoY basis, respectively. Additional data showed that the producer price index (PPI) also remained at a higher level than expected.
Therefore, these numbers mean that the Bank of England (BoE) is boxed in a corner since the British economy is expected to slow down this year. As such, it will likely need to continue hiking interest rates in a period of stagflation.
There will be no economic news from the UK on Thursday. Therefore, traders will focus on the ongoing earnings season from the US and minor economic numbers. The US will publish key economic data like the initial jobless claims and the Philadelphia Fed manufacturing data. Also, Fed’s Michele Bowman and Christopher Waller will talk and share their opinions about the next Fed actions.
GBP/USD technical analysis
The GBP/USD pair dropped to a low of 1.2354 on Monday as investors reflected on the hawkish statement by Christopher Waller. This was an important level since it coincided with the lowest point on April 10th.
The pair then rebounded to the current 1.2446, which also coincides with the highest point on January 23rd. It is inside the Ichimoku Cloud and slightly above the 25-day and 50-day moving averages. Therefore, with no major data expected, the pair will likely remain in this consolidation phase on Thursday. A move above Wednesday’s high of 1.2470 will signal that bulls have prevailed, which will push it to the year-to-date high of 1.2546.
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