The Bank of England and the Federal Reserve have a lot riding on them if GBP/USD has to attain bullish momentum. At the core lies the decision to keep rates either unchanged or bring them down. Anticipation is that the US CPI, Consumer Price Index, and unemployment data by the UK Government will offer support.
GBP/USD was last seen at 1.2557, now down by more than 1.40% below the highest point that it had this month. The bullish view for the pair is buying the pair and setting the take-profit at 1.2650. Then, add a stop-loss at 1.2450 for a timeline of 1-2 days. Alternatively, bearish views can be explored with a take-profit at 1.2450 and a stop-loss at 1.2650. The sell-stop can be set at 1.2545.
Technical analysis overview
The technical analysis comes down to the Fibonacci Retracement Point and the moving average. The pair has been on a declining trend for the last few days. It has fallen below the 50% Fibonacci Retracement Point and is lower than the 50-period moving average.
Nevertheless, the outlook is positive since it has formed a descending channel that is otherwise known as a bullish flag pattern. However, it will be confirmed only if the pair moves above the upper side of the descending channel. GBP/USD forex signal does highlight a bullish breakout, but it is recommended to stay vigilant for select outcomes. For instance, the unemployment rate can dip in the next report.
The Office of National Statistics has highlighted an unchanged unemployment rate of 4.2%. Not just the sustainability of that figure, it is further coupled with a drop in wages, which fell to 7.2% from 8%. It is worse than the medium estimate of 7.7%. Making things worse is that the figure comes to 7.3% when one excludes bonuses.
The economy is expected to expand by a minimum of 0.6%. September set a new record with 1.3%. The inclusion of industrial and manufacturing production figures will enrich this progression.
The American side is bringing its CPI, the Consumer Price Index. The inflation rate is dancing around 3.1% for November. This is a slip from 3.2% in the previous month. Following a slight change in headline inflation, sights are on core inflation, which is stagnant at 4% against the target of 2% as set by the Federal Reserve.
The BoE and the Federal Reserve could let go of a further rise in interest rates. Jerome Powell, the Chair of the Federal Reserve, may issue a warning to highlight probable signs of an increase. He could state that rates will remain at a restrictive level for some time. Meaning, both could issue a warning of keeping rates higher for a longer time while not clarifying when and by how much they are planning to drop the rates.
Impact on GBP/USD by Fed and BoE decision
The Bank of England and the Federal Reserve’s decisions will determine where the graph moves. It focuses on maintaining or lowering interest rates in the face of popular calls for a more controlled economy. It will impact the pair of GBP/USD as a reduced rate will free up capital for trade between both countries. GBP/USD forex signals are bullish. A larger strength could be derived from a higher amount of trade.
A mild reaction has already come to light from GBP/USD trading pairs as the CPI dipped slightly in the previous month. Another movement will determine how the pair reacts. Needless to say, this will be based on the fundamentals that the Bank of England and the Federal Reserve draft in relation to rate hikes, rate drops, or even unchanged rates, for that matter.
Every other pair is waiting for the decisions to be made public. For instance, the Japanese Yen has lost its traction as its pair with the US Dollar inches closer to 142.00 earlier today.
The forex space is constantly changing its sentiments. It is best to keep the graphical presentation under sight to make an informed decision. GBP/USD will continue to take inspiration from the Federal Reserve and the Bank of England, as a lot stands on how they deepen their calls with regard to rate change.