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MENAFN- Daily Forex) Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3500. Add a stop-loss at 1.3300. Timeline: 1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3300. Add a stop-loss at 1.3500.
GBP/USD pair continued its upward trend after the UK published a strong consumer inflation report, raising the possibility that the Bank of England (BoE) will hike interest rates in the next meeting. It jumped to 1.3410, its highest level since September 16 and 2% above the lowest level this month.
Top Regulated Brokers1 Get Started 74% of retail CFD accounts lose money Odds of BoE Interest Rate Hikes Rise
Traders are betting that the Bank of England will hike interest rates in its next meeting. On Tuesday, the Office of National Statistics (ONS) said that the UK economy created 102k jobs in the three months to August, higher than the expected 20k. The unemployment rate dropped from 4.9% in July to 4.7%, better than the expected 4.9%.
Another report released on Wednesday showed that the headline consumer price index (CPI) rose 0.4% in September, higher than the average estimate of 0.3%. This increase resulted in an annual jump of 3.5%, higher than the expected 3.4%.
Similarly, core inflation, which excludes the volatile food and energy prices, rose 0.2% on a month-on-month basis. This increase brought its annualized rate to 2.8% from the previous month's 2.6%. These numbers mean that UK's inflation has moved further away from the BoE's target of 2.0%.
Therefore, these figures suggest the Bank of England is likely to raise interest rates by 25 basis points at its next meeting, which would lift the benchmark rate to 4.0%. Governor Andrew Bailey is due to speak today, and his statement may offer further clues on the policy outlook.
GBP/USD may also react to the upcoming US initial and continuing jobless claims data. While important, these releases are likely to have only a limited impact on the pair, since most analysts expect the Federal Reserve to leave rates unchanged at its meeting next week/USD Technical Analysis
The daily chart shows that the GBP/USD pair bottomed at 1.3161, a notable level since it was its lowest level in April, June, and October. It has jumped above the crucial resistance level of 1.3310, its highest point on September 30.
The pair has jumped to the upper side of the Bollinger Bands. It also rose above the 50-day moving average. Also, the Relative Strength Index (RSI) has continued rising, a sign that it is gaining momentum. Therefore, the pair will likely continue rising as bulls target the key resistance level of 1.3500.
EURUSD Chart by TradingView
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