GBP/USD Rejects Resistance Ahead of Crucial BoE Rate Decision
The Bank of England (BoE) will announce its interest rate decision and publish the Monetary Policy Statement on Thursday at lunchtime. Let’s delve into market expectations and the positioning of GBP/USD ahead of this pivotal event.
Sticky Services Inflation
Last month, the BoE teased the idea of a rate cut as early as June. However, with economic growth, wage increases, and services inflation surpassing expectations, that dream now seems more like wishful thinking. Plus, with a general election set for July 4 and the mandatory period of silence for policymakers before then, a June rate cut looks to be off the table.
No flashy press conferences or new reports are expected, but analysts will be diving deep into the meeting minutes. The BoE has been consistent in stating that rates need to stay "restrictive" for an extended period to combat inflation.
The upcoming May inflation data, released on Wednesday, will shed more light on the situation. Economists are betting on a slowdown in price growth to the BoE’s 2% target, down from 2.3% in April. Lower energy prices filtering through the supply chain are expected to drive down goods prices, which already saw a negative annual growth rate of -0.8% in April.
However, a sticking point remains services inflation, which was a surprising 5.9% in April. This persistent domestic price pressure will be under close scrutiny. So, while the BoE might maintain its stance this week, significant developments could be just around the corner.
GBP/USD: Daily Candle Chart Analysis
The March swing highs mark a key resistance level on GBP/USD’s daily candle chart. A resistance ‘zone’ is established by taking the highest high and highest close during the formation of these March highs. Last week’s price action swiftly rejected the bottom of this resistance zone, forming a short-term top.
Past performance is not a reliable indicator of future results
GBP/USD: Hourly Candle Chart Analysis
The hourly candle chart provides a closer look at the recent rejection of the resistance zone. The market is trending lower on this timeframe, with short-term momentum remaining bearish as we approach Thursday’s interest rate decision. Traders will be closely monitoring the volume-weighted average price (VWAP) anchored to last week’s highs, which will serve as a barometer for short-term momentum.
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.84% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Sticky Services Inflation
Last month, the BoE teased the idea of a rate cut as early as June. However, with economic growth, wage increases, and services inflation surpassing expectations, that dream now seems more like wishful thinking. Plus, with a general election set for July 4 and the mandatory period of silence for policymakers before then, a June rate cut looks to be off the table.
No flashy press conferences or new reports are expected, but analysts will be diving deep into the meeting minutes. The BoE has been consistent in stating that rates need to stay "restrictive" for an extended period to combat inflation.
The upcoming May inflation data, released on Wednesday, will shed more light on the situation. Economists are betting on a slowdown in price growth to the BoE’s 2% target, down from 2.3% in April. Lower energy prices filtering through the supply chain are expected to drive down goods prices, which already saw a negative annual growth rate of -0.8% in April.
However, a sticking point remains services inflation, which was a surprising 5.9% in April. This persistent domestic price pressure will be under close scrutiny. So, while the BoE might maintain its stance this week, significant developments could be just around the corner.
GBP/USD: Daily Candle Chart Analysis
The March swing highs mark a key resistance level on GBP/USD’s daily candle chart. A resistance ‘zone’ is established by taking the highest high and highest close during the formation of these March highs. Last week’s price action swiftly rejected the bottom of this resistance zone, forming a short-term top.
Past performance is not a reliable indicator of future results
GBP/USD: Hourly Candle Chart Analysis
The hourly candle chart provides a closer look at the recent rejection of the resistance zone. The market is trending lower on this timeframe, with short-term momentum remaining bearish as we approach Thursday’s interest rate decision. Traders will be closely monitoring the volume-weighted average price (VWAP) anchored to last week’s highs, which will serve as a barometer for short-term momentum.
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.84% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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