The Bank of England raised rates by 50 basis points, a record high for the last 27 years, and the Bank of Britain expects a recession for the economy in the second half of 2022.
The GBP/USD rose to 1.2212 and then fell to 1.2065. The pair closed at 1.2163 on Thursday and is trading at 1.2142, down 0.12% at the time of writing.
Source : TradingView
The Bank of England rate hiked 1.75% on Thursday, the vote was 8 to 1. Expectations of a 1.5% drop in GDP in 2023 and a 15 month recession in the UK are confirmed: “GDP will fall by 0.2% in the second quarter, grow by 0.45 in the third quarter, and then show negative growth for five quarters, starting in the fourth quarter.”
In addition, the bank plans to reduce its balance sheet by 10 billion pounds each quarter.
The inflation forecast rose to 13% by the end of 2023, compared to 9.4% in June, while the consumption index continues to fall.
The labor market is also weakening in England along with declining consumption as initial jobless claims exceeded the forecasted 259K and rose to a six-month high of 262K on lower labor demand.
Japan’s annual monetary return rose from 1% to 2.2% in June.
The unemployment rate and median earnings in America are projected to remain the same as in June. All eyes are on the U.S. NFP report in July.
Markets will expect more Fed rate hikes and will strongly keep the GBP/USD below the trend line and 200 SMA resistance areas.
GBP/USD could break above 1.2150 and head towards its monthly highs closer to 1.2250-1.2300. This will be attractive for traders, despite the recession forecast.
On top of that, U.S. exports jumped vs. imports and the U.S. trade balance narrowed to $79.6 billion from $80.1 billion.
The Relative Strength Index (RSI) is aiming higher .
Technical Indicators :
Daily SMA20- 1.2023 .
SMA50 – 1.2201
SMA100- 1.2499
SMA200- 1.2965
The next resistance for the GBP/USD is 1.2188, which is the 50 EMA. On the other hand, the first support will be 1.2100.
Expected factors affecting the GBP/USD pair.
The UK house price index for July will be known soon, as well as the BBA mortgage rate.
Non-farm payroll and unemployment data will be released in the U.S. Forecasts are as follows: employment -250k against 372k in June, unemployment will remain at the same level of 3.6%.
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