GBP/USD forecast after the hawkish FOMC and BOE decisions
- The GBP/USD pair rallied after the hawkish Bank of England decision.
- The decision came a few hours after the Fed delivered another hawkish decision.
- The pair will likely keep rising as bulls target the key resistance at 1.3760.
The GBP/USD pair rocketed higher after the latest Bank of England (BOE) interest rate decision. The pair rose from this week’s low of 1.3610 to a high of 1.3700.
BOE interest rate decision review
The GBP/USD popped after the BOE delivered its September monetary policy meeting. As widely expected, the bank decided to leave interest rates at the record low of 0.10%.
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The policymakers also voted to continue with its 875 billion pound quantitative easing (QE) program and downgraded its forward growth forecast.
In the statement, Andrew Bailey said that the case for tightening monetary policy conditions had tightened substantially. Therefore, analysts believe that the BOE will start tapering its asset purchase program in the coming months.
Still, the UK faces key challenges ahead. For one, the furlough program is about to end, meaning that the country could see an uptick of the unemployment rate.
At the same time, the country is facing higher energy costs, leading several companies to go bankrupt. Higher energy prices will likely push the rate of inflation above 4%, according to the bank.
In addition, the ongoing labour shortages and the overall supply chain challenges are major risks for the UK economy. Indeed, data published by Markit showed that the flash manufacturing and services PMIs declined to 56.3 and 54.6, respectively.
In a statement, an analyst at Abrdn said:
“As such, investors should prepare for the prospect of interest rates increasing next year, making the UK standout somewhat compared to other major economies where rates are likely to remain unchanged through next year.”
The GBP/USD is also reacting to the relatively hawkish Federal Reserve decision. In its decision on Wednesday, the Fed pointed to higher rates in the coming year. At the same time, the Brazilian central bank hiked rates while the Turkish central bank did the unthinkable and slashed rates.
The hourly chart shows that the GBP/USD pair jumped after the hawkish BOE decision. It managed to move slightly below the 38.2% Fibonacci retracement level. It has also moved above the 50-day and 25-day moving averages, which have made a bullish crossover.
Therefore, the pair will likely keep rising as investors target the key 50% retracement level at 1.3760. On the flip side, a drop below 1.3650 will invalidate the bullish view.
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