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Can the BOE Help Drive a New Continuation on the GBPUSD?

August 4, 2022
by Joseph Jeffriess, Market Analyst

Hello readers, thanks for stopping by for Thursday’s update. Today we’re looking at the GBPUSD and wondering if the price can confirm a new continuation higher.

Today the Bank of England is expectationed to raise interest rates by 50 points, its largest rate hike in 30 years. Until this point, we have seen hikes 25-points, but inflation hit another 40-year high in June, which could be the catalyst for the above-average hike. Globally, central banks have been dealing with inflation issues since late 2021, and central banks have not been afraid to pull the trigger on steep hikes to try and rain in the current inflation problem.

A hike of 50 points and a statement that points to further hikes to help rain in inflation could be a driver to help lift the GBPUSD further along on its current recovery after hitting lows in July not seen since 2020.

Looking at the current D1 chart below, we can see that the price has cleared the downtrend with the last leg higher. This week we have seen a two-day decline, but buyers look to be interested as yesterday’s session saw plenty of demand at 1.2100, and this level for now looks to hold a demand area. We also notice short-term support at 1.2140. Resistance is seen at 1.2270, but we are wondering if we get the 50-point rate rise and a supportive message in the statement will we see the GBPUSD form a new push higher and confirm a trend continuation?

If the statement fails to boost confidence or the rate rise comes in at 25 points, we could see a move lower, and a break of 1.20100 could be a warning that sellers maintain control.

Today’s rates decision and statement are due from the Bank of England at 9 pm AEST.

GBPUSD D1 Chart

All times are AEST.