GBP/USD Forecast: Vulnerable After BoE, Looking Ahead to NFP
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
- GBP/USD remains vulnerable under 1.3500.
- Brexit concerns are lingering, keeping the pound under pressure.
- Market participants await US NFP data release due in the New York session today.
The GBP/USD forecast remains bearish as the BoE kept interest rates unchanged while Greenback gains as a prelude of upbeat US NFP.
The British pound remains under downward pressure after falling below the 1.3500 handle. The GBP/USD currency pair is currently down by 0.52% on the day to 1.3425.
Following yesterday’s surprise announcement of Bank of England (BoE) policy, which prompted a sharp reassessment of expectations for a rate hike in the next few months, the pound declined. If the “old lady” doesn’t react to higher inflation, the pound will decline.
According to RTE Europe editor Tony Connelly, expectations are growing for Article 16 to take effect in the UK.
“There is an opinion that the UK might misjudge the EU’s response. that we will be entering a slow trial period where the UK will suspend its obligations under the Protocol and then the process will drag on,” added Connelly. “However, it is believed that the EU’s response could be much faster and ‘more radical’ than expected.”
In terms of the Bank of England, we expect it to raise rates at its next monetary policy meeting in December, while there is a risk it may wait a little longer until February.
The Bank of England is expected to raise its interest rate to 1.00% by the end of next year. By only two more increases of 0.25 points in 2022, we now expect them to occur in May and August, raising the discount rate to 0.75%. We are, however, skeptical that it will surpass 1.00% in 2022.
-Are you looking for the best investment UK guide? Read our detailed guideline to get started-
As market participants become increasingly concerned that the Bank of England will be unable to respond to higher inflation in the UK, downside risks to the pound will continue to grow.
The relationship between real yield spreads and the pound sterling yield will be closely monitored. As market inflation expectations rose after yesterday’s MPC meeting, real UK yields fell even more sharply than nominal yields.
The US dollar has gained on the day in anticipation of strong US NFP data. However, if the data miss expectations, we may see a rebound in the major currency pairs.
-Are you looking for the best algorithm trading platform? Check out our detailed guide-
GBP/USD forecast: Technical view
The GBP/USD price is prone to test the 1.3410 (YTD lows), and further weakness may expose the price to break below the 1.3400 mark. The next support will emerge at 1.3370. On the upside, 1.3500 remains a stiff hurdle to break ahead of 1.3570.
