GBP/USD Outlook: Bulls Boiling up Near 1.35 amid Hawkish BoE
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- The GBP/USD rose strongly on Wednesday amid growing expectations of an imminent BoE rate hike.
- An additional boost to the pair was provided by the USD’s plunge from a 16-month peak.
- Amidst Brexit woes, the dollar was underpinned by hawkish Fed expectations.
The GBP/USD outlook turned positive as the price surged to 1.3500 area, looking at various optimistic factors.
The GBP/USD exchange rate rose more than 100 pips from below 1.3400 early Wednesday, boosted by various factors. First, due to unexpectedly high UK CPI data and the Bank of England’s immediate rate hike in December, the British pound surged sharply.
Consumer prices in October rose 4.2% y/y, the fastest pace since December 2011, the UK’s Office for National Statistics reported. Further, core inflation (excluding volatile food and energy) exceeded consensus expectations and increased 3.4%.
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On the other hand, the US dollar struggled to maintain intraday gains as yields on US Treasury bonds fell. The dollar bulls maintained their hold throughout Thursday’s Asian session, pushing the pair higher for the third straight day.
Although the bulls have yet to develop momentum above the key psychological level of 1.3500, it was the fourth day of positive movement in the past five days. Fed tightening and a softer risk tone have given the US dollar a boost and limited the rise in important currencies, at least for the time being.
Additionally, the possibility that the UK government may invoke Article 16 and expose parts of the Northern Ireland Protocol prevents traders from aggressively betting on bulls around the British pound. Consequently, the market will remain focused on upcoming Brexit headlines concerning sterling, which will give big companies some momentum.
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Traders will turn their attention to US economic data later in the early North American session, such as the Philadelphia Fed Manufacturing Index and regular weekly initial unemployment claims. In addition to the US bond yields and a speech by New York Fed President John Williams, this will increase demand for the US dollar and create some trading opportunities around it.
GBP/USD price technical outlook:
The GBP/USD technical forecast is bullish as the price managed to surge well above the 20-period and 50-period SMAs. However, the volume data is unclear as the clues for bullish reversal have not yet unfolded. Hence, we may need a clear breakout of 1.3500 level to find strong buying momentum. On the downside, 1.3450 and 1.3400 will continue to lend support.
