Last week, the pound, paired with the dollar, updated a multi-month price maximum, reaching the 1.2524 mark. However, GBP/USD buyers could not hold within the 25th figure: as soon as traders crossed the 1.2500 targets, they began to fix profits en masse, extinguishing the northern impulse. As a result, sellers seized the initiative, after which the price slowly slid toward the base of the 24th figure. Nevertheless, the pair can still return to previous levels, primarily due to the weakening of the US currency.
Currency strategists from several major banks and financial conglomerates (in particular, Societe Generale Group, Scotiabank, and Credit Suisse) published their reviews in early April, predicting further growth for the British currency. For example, according to SocGen economists, the GBP/USD pair will rise to 1.2610 in the medium term and possibly to 1.2750. Experts at Scotiabank say that the British pound will rise to 1.2700–1.2750, while experts at Credit Suisse say that 1.2650 is the final goal.
The current price decline is primarily due to a thin market. The Catholic world is celebrating Easter, and many trading platforms are closed today (and were closed on Friday). Since prices are going down, people should be careful, especially when the most important (for the dollar) macroeconomic reports come out.
The day after tomorrow, the US consumer price index will be published, followed by the producer price index on Thursday, the import price index on Friday, and the University of Michigan consumer sentiment index on Saturday. This statistical data set can reshape the fundamental picture for GBP/USD. If these releases come out at least at the forecast level (not to mention the “red zone”), the likelihood of a 25-point rate hike by the Fed next month will decrease again, although currently the chances of this scenario are estimated at 60% (according to CME FedWatch Tool data). The dollar’s positions are shaky, as US inflation in March may slow down more than expected.
In other words, this week may create certain prerequisites for decoupling the Fed and the Bank of England’s rates. This fact will provide significant support to GBP/USD buyers.
On the eve of important releases
Remember that the English government raised the interest rate again (by 25 points) in March, even though there were rumors that the current cycle of tightening monetary policy was over. At the same time, the Bank of England made it clear that it is ready to tighten monetary policy further if inflation accelerates. The latest inflation report, on the other hand, surprised people on the market with its “green tint”: all of the parts of the report were better than expected. Inflation in the UK accelerated to 10.4%, despite predictions of further decline. If the March consumer price index follows the trajectory of the February release, the likelihood of the Bank of England raising rates at the next meeting will increase even more. while the Federal Reserve rate hike is still in question.
The markets are pricing in about an 80% probability of the English regulator raising the rate by 25 basis points at the meeting on May 11. And many experts are confident that this will not be the last increase this year. Again, regarding the Fed, the market’s overall expectations are less hawkish; the assumed median forecast increase will be the last in the current cycle of monetary policy tightening. Moreover, some analysts do not rule out a rate cut in the second half of this year. Jerome Powell hypothetically does not rule out this scenario; following the March meeting, he noted that this scenario is not ruled out but is “not the baseline.”
Conclusions
The current fundamental background for the GBP/USD pair does not contribute to developing a bearish trend. Of course, much will depend on US inflation, whose March figure we will learn this week. But if the reports come out at least at the forecast level, buyers of the pair will strengthen their positions and likely return to the area of the 25-figure range.
From a technical perspective, the price on the D1 timeframe is located between the middle and upper lines of the Bollinger Bands indicator and above all lines of the Ichimoku indicator, which demonstrates a bullish “Line Parade” signal. Notably, despite the bearish price pullback, GBP/USD sellers failed to overcome the support level at 1.2400, which corresponds to the Tenkan-sen line on the daily chart. This suggests that the pair maintains the potential for further growth towards the main resistance level at 1.2530 (the upper line of the Bollinger Bands indicator on the D1 timeframe).
The material has been provided by InstaForex Company – www.instaforex.com
Last week, the pound, paired with the dollar, updated a multi-month price maximum, reaching the 1.2524 mark. However, GBP/USD buyers could not hold within the 25th figure: as soon as traders crossed the 1.2500 targets, they began to fix profits en masse, extinguishing the northern impulse. As a result, sellers seized the initiative, after which the price slowly slid toward the base of the 24th figure. Nevertheless, the pair can still return to previous levels, primarily due to the weakening of the US currency.
Currency strategists from several major banks and financial conglomerates (in particular, Societe Generale Group, Scotiabank, and Credit Suisse) published their reviews in early April, predicting further growth for the British currency. For example, according to SocGen economists, the GBP/USD pair will rise to 1.2610 in the medium term and possibly to 1.2750. Experts at Scotiabank say that the British pound will rise to 1.2700–1.2750, while experts at Credit Suisse say that 1.2650 is the final goal.
The current price decline is primarily due to a thin market. The Catholic world is celebrating Easter, and many trading platforms are closed today (and were closed on Friday). Since prices are going down, people should be careful, especially when the most important (for the dollar) macroeconomic reports come out.
The day after tomorrow, the US consumer price index will be published, followed by the producer price index on Thursday, the import price index on Friday, and the University of Michigan consumer sentiment index on Saturday. This statistical data set can reshape the fundamental picture for GBP/USD. If these releases come out at least at the forecast level (not to mention the “red zone”), the likelihood of a 25-point rate hike by the Fed next month will decrease again, although currently the chances of this scenario are estimated at 60% (according to CME FedWatch Tool data). The dollar’s positions are shaky, as US inflation in March may slow down more than expected.
In other words, this week may create certain prerequisites for decoupling the Fed and the Bank of England’s rates. This fact will provide significant support to GBP/USD buyers.
On the eve of important releases
Remember that the English government raised the interest rate again (by 25 points) in March, even though there were rumors that the current cycle of tightening monetary policy was over. At the same time, the Bank of England made it clear that it is ready to tighten monetary policy further if inflation accelerates. The latest inflation report, on the other hand, surprised people on the market with its “green tint”: all of the parts of the report were better than expected. Inflation in the UK accelerated to 10.4%, despite predictions of further decline. If the March consumer price index follows the trajectory of the February release, the likelihood of the Bank of England raising rates at the next meeting will increase even more. while the Federal Reserve rate hike is still in question.
The markets are pricing in about an 80% probability of the English regulator raising the rate by 25 basis points at the meeting on May 11. And many experts are confident that this will not be the last increase this year. Again, regarding the Fed, the market’s overall expectations are less hawkish; the assumed median forecast increase will be the last in the current cycle of monetary policy tightening. Moreover, some analysts do not rule out a rate cut in the second half of this year. Jerome Powell hypothetically does not rule out this scenario; following the March meeting, he noted that this scenario is not ruled out but is “not the baseline.”
Conclusions
The current fundamental background for the GBP/USD pair does not contribute to developing a bearish trend. Of course, much will depend on US inflation, whose March figure we will learn this week. But if the reports come out at least at the forecast level, buyers of the pair will strengthen their positions and likely return to the area of the 25-figure range.
From a technical perspective, the price on the D1 timeframe is located between the middle and upper lines of the Bollinger Bands indicator and above all lines of the Ichimoku indicator, which demonstrates a bullish “Line Parade” signal. Notably, despite the bearish price pullback, GBP/USD sellers failed to overcome the support level at 1.2400, which corresponds to the Tenkan-sen line on the daily chart. This suggests that the pair maintains the potential for further growth towards the main resistance level at 1.2530 (the upper line of the Bollinger Bands indicator on the D1 timeframe).
The material has been provided by InstaForex Company – www.instaforex.com
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