GBP/USD Price Analysis: Staying Above 1.3250 Post-FOMC, Awaits Key Data
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- Fed’s cautious stance provides respite to the Sterling.
- Brexit optimism continues to lend support to the GBP/USD.
- All-time high inflation in the UK urges for a rate hike.
The GBP/USD price analysis is mildly bullish as the price is hovering at 1.3255-60, down 0.07% on the day ahead of Thursday’s London opening after a weekly rise is trimmed.
After the Fed’s hawkish pause, the cable pair rose the most in just a week the previous day. It may have to do with comments by Fed chairman Jerome Powell that “the Omicron variant poses a risk to the outlook,” and the promise not to hike rates until the rate cuts are complete.
Apart from this, optimism about Brexit can be seen as supporting GBP/USD prices since the UK has canceled border controls for goods from Ireland entering the UK after the January 1st deadline. Furthermore, a trade dispute may be linked to statements made by EU Parliament President David Sassoli, who was quoted by UK Express as warning that the UK could face serious consequences.
Nonetheless, it is important to note that the highest daily COVID-19 infections in history and fears of health care disruptions seem to be impacting GBP/USD prices.
The US Dollar Index (DXY) is the top growth filter amid expectations that ECB and Bank of England policymakers will disappoint the hawks as the virus situation in the bloc and UK worsens.
Inflation has recently surged to an all-time high in the UK, leading policymakers to maintain a bullish bias toward higher interest rates in 2022. The Bank of England’s Quarterly Inflation Report (QIR) underscores the same point.
The UK and US December PMIs, except the ECB and the Bank of England, will also play a significant role in the short-term GBP/USD exchange rate. However, buyers of the pair are likely to run into trouble considering the bullish expectations and expected response to aggressive Fed policies.
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GBP/USD price technical analysis: Upthrust bar to limit downside
The GBP/USD price posted a widespread up bar that touched the lows around 1.3160 and then managed to close above the 20-period and 50-period SMAs on the 4-hour chart. The ultra-high volume of the bar suggests that the markets may see a limited downside and may continue to rally towards 1.3300 ahead of 1.3330 and 1.3370.
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On the flip side, 1.3200 will remain strong support ahead of 1.3160. However, the path of least resistance lies on the upside.
