The GBP/USD is back to the highs it reached in June 2016. It was achieved with the help of the macroeconomic statistics, which turned out to be better than before. However, in these circumstances the Pound could have rising slower, with an eye to the Brexit and the debates surrounding it. The major contribution to the quick growth was made by the Bank of England, which said it might increase the key rate in the months to come.
During the September meeting, the Bank of England made a decision to keep the key rate unchanged at 0.25% along with the QE program at 435B Pounds. This time the regulator, which is usually very careful and conservative, was more energetic. In the comments, it announced that there might be reasons to increase the key rate in the next several months.
Most likely, it’s all about the inflation. The inflationary pressure on the country’s economy is increasing and it’s much easier to force the CPI into the required range by means of changing the rate. As a rule, the Bank of England has no problems to “accelerate” the CPI as it finds fit, but later the indicator has to be kept within bounds. This is the way the British regulator has been operating for the last 8 years: controlling the inflation by means of monetary tools. And one should admit, it runs smoothly.
For the Pound, the rate increase in the nearest future will stabilize the country’s economy and eliminate real dangers from both the Brexit and events outside the United Kingdom. Using the rate increase as a basis, the British currency may continue rising, especially if the statistics continues to confirm the economic stability.
Also, this week the currency market is waiting for the results of the September meeting of the US Federal Reserve. So far, the USD is very vulnerable (including the GBP pair), but market trends may change depending on the Fed’s comments and decisions.
It’s better to analyze the technical picture of the British Pound using the GBP/USD pair charts. If one takes a look at the weekly timeframe, it can be seen that the instrument has been moving inside the uptrend for about a year.
More details can be seen at the daily timeframe. The chart not just shows the ascending movement, but one can see that this movement “boosted” after the price broke the resistance level of the short-term ascending channel. Later, the instrument may start a short-term correction to the broken resistance level, which now provides support. However, the future outlook remains “bullish”. The main upside target is close to the upside border of the mid-term channel at 1.4000.
Author: Dmitriy Gurkovskiy, senior analyst at RoboForex
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.