Since a rate hike has already been priced in, there is a likelihood that the pair will have a pullback after the decision.
Bullish View
- Buy the GBP/USD pair and set a take-profit at 1.3500.
- Add a stop-loss at 1.3650.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.3550 and a take-profit at 1.3500.
- Add a stop-loss at 1.3600.
The GBP/USD pair continued its bullish trend as the market readjusted to the upcoming interest rate decision by the Bank of England (BOE). The pair rose to a multi-week high of 1.3588, which was about 1.52% above the lowest point this year.
BOE Interest Rate Decision
The British pound has been in a strong bullish trend in the past few days ahead of the upcoming rate decision.
Economists expect that the BOE will once again increase interest rates by another 25 basis points as the economy continued to recover. If the bank increases rates on Thursday, it will be its first time of doing so in about 17 years.
The bank surprised investors by implementing its first rate hike in December. A lot has come out since the bank made that decision.
For example, data published in January showed that the country’s inflation jumped to the highest level in 30 years in December. This performance was due to rising energy costs, something that the bank cannot solve.
Data published this year also showed that the UK unemployment rate has dropped substantially in the past few months. It was at 3.9% in November, which was the lowest level since the pandemic started.
Further, the housing market has gotten red hot and there is a likelihood that the trend will continue barring any further rate hikes. On Tuesday, data by the Nationwide Society showed that the country’s home price index jumped sharply in January. The number of people seeking mortgages has also done well.
Therefore, the GBP/USD pair has risen because investors are waiting for a 25 basis points rate hike on Thursday. Some analysts believe that Andrew Bailey will surprise by implementing a 0.50% hike.
GBP/USD Forecast
On the four-hour chart, we note that the GBP/USD pair has been in a strong bullish trend in the past few weeks. Along the way, the pair has moved between the 23.6% and 38.2% Fibonacci retracement levels. The pair has also moved above the Ichimoku cloud and the 25-day moving average.
The GBPUSD pair has moved above the first resistance of the Woodie pivot point and the first support of the Andrews Pitchfork tool.
Therefore, the outlook for the pair is bullish ahead of the BOE decision. However, since a rate hike has already been priced in, there is a likelihood that the pair will have a pullback after the decision.
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