GBP/USD forecast: Ascending channel forms ahead of BoE decision

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on Aug 3, 2022
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  • GBP/USD pair has been in a strong bullish trend recently.
  • Focus shifts to the upcoming Bank of England decision.
  • The bank is expected to hike interest rates by 0.50%.

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The GBP/USD price tilted upwards on Wednesday as investors waited for the upcoming interest rate decision by the Bank of England (BoE). The forex pair rose to 1.2200, which was slightly above this week’s low of 1.2132.

Bank of England decision

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The GBP/USD pair was relatively calm on Wednesday as the focus shifted to the upcoming BoE decision. Economists expect that the bank will deliver another bigger interest rate hike in a bid to deal with the soaring inflation. Precisely, analysts expect the bank to increase its interest rates by 0.50%, which will be the biggest hike since 2004.

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The bank has embraced a more hawkish tone because of the rising inflation. Data published last month revealed that inflation surged to a multi-decade high of 9.4%, which was the highest point in more than three decades. 

Other numbers have sent mixed pictures of the UK economy. For example, the unemployment rate remained at 3.7% in June as the labor market tightened. At the same time, retail sales and consumer confidence declined sharply. 

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As a result, according to the International Monetary Fund (IMF), the UK will have the slowest recovery among G7 member states in 2023. Therefore, there are concerns about how high the BoE will hike interest rates.

Meanwhile, the housing sector has continued to weaken in the past few months. Data published by Nationwide showed that house prices pulled back slightly in July. In a separate report, Taylor Wimpey, one of the biggest housebuilding companies, said that demand is still robust as it hiked its earnings estimates.

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The GBP/USD price will next react to the latest US non-farm payrolls (NFP) numbers that are scheduled for Friday. Analysts expect that the labor market slowed down slightly in July.

GBP/USD forecast

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GBP/USD
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The four-hour chart shows that the GBP/USD price has been in a strong bullish trend in the past few days. It has formed an ascending channel that is shown in green. At the same time, the pair has remained above the 25-day and 50-day moving averages and is between the ascending channel. 

Therefore, the pair will likely keep rising as investors target the key resistance at 1.2333. However, as I wrote in my AUD/USD forecast, the pair will likely pull back after the BOE decision as investors sell the fact.

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