Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.2490.
- Add a stop-loss at 1.2800.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.2715 and a take-profit at 1.2800.
- Add a stop-loss at 1.2500.
The GBP/USD pair remained on edge after the UK published the November consumer inflation report and after the Federal Reserve delivered its last interest rate decision of the year. Focus now shifts to the Bank of England (BoE), which will conclude its two-day meeting.
Bank of England’s Decision Ahead
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The GBP/USD pair wavered after the Federal Open Market Committee (FOMC) delivered its interest rate decision. It slashed rates by 0.25% as was widely expected and hinted that it will be gradual when implementing the next cuts.
The Fed is concerned about the labor market and the ongoing progress on inflation. The most recent data showed that core inflation remained at 3.3%, while the unemployment rate rose to 4.2%. Therefore, analysts expect the bank to pause its rate cuts in the first quarter of 2025.
The next key US economic data will be the upcoming GDP numbers, which will provide more information on the country’s economic growth. The first two estimates showed that the economy expanded by 2.8% in the third quarter.
The GBP/USD pair also reacted to the November Consumer Price Index (CPI) data that came out on Wednesday. The data showed that the headline CPI rose from 2.3% to 2.6% on an annual basis, while the core CPI moved from 3.3% to 3.5%. UK’s inflation is being driven by house prices and rents. The average property price rose by 3.4%, while rents rose by 9.1%.
Looking ahead, the BoE will conclude its two-day meeting and deliver its interest rate decision. Economists have mixed opinions on what the bank will do. Some expect it to slash rates since the economy is struggling, while others see it leaving them unchanged.
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The bank’s challenge is that, while cutting rates may help the economy recover, it will likely lead to higher inflation.
GBP/USD Technical Analysis
The GBP/USD pair was trading at the psychological level at 1.2700 ahead of the Bank of England decision. This was an important level since it was slightly below the 50% Fibonacci Retracement level.
The pair has remained below the 50-day moving average and formed a bearish flag chart pattern. This pattern is made up of a long vertical line and a consolidation. In most periods, it often leads to a bearish breakout.
This breakdown may happen later on Thursday when the BoE publishes its decision. If this happens, the next point to watch will be at 1.2490, the lower side of the flag pattern.
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