fundamental News - GBP/USD

Investor concern is rising that the Bank of England is moving too swiftly to tighten monetary policy as it gears up to become one of the first central banks to raise interest rates following the coronavirus crisis.


Markets have responded to recent hawkish signals from the BoE by pricing in a series of interest rate rises over the next year, sparking a vigorous sell-off in short-dated government debt. But a lack of reaction in long-dated bonds or the pound betray an anxiety among investors that Threadneedle Street, in its haste to respond to a spike in inflation, may be in danger of committing a “policy mistake”, forcing it to reverse rate hikes.

After governor Andrew Bailey said on Sunday that the BoE “will have to act” to combat rising prices, markets brought forward the expected timing of the first interest rate rise to next month. Another rise to 0.5 per cent is now almost priced in for the December BoE meeting, followed by a further flurry which would take interest rates to 1.25 per cent by the end of next year, the highest level since the 2008-9 financial crisis.

Technical analysis

GBP/USD recover from previous session 20-SMA 1.37165 support on the 4-hourly chart. The up-sloping resistance around 1.38000 is now the target for the bull, a trade above will lead the pair to the daily 100-SMA and the 200-SMA 1.38074 and 1.38440.

expectation today: bullish



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