- GBP/USD Bulls Attempt to Hold Key Support Zones on Charts
- However, the dollar remains in the hands of bears ahead of key central bank meetings.
The bulls of GBP/USD they are attempting a correction from a major support zone near the midpoint of the 1.1400 area, with price recovering from a low of 1.1462 and now testing the 1.1500 level. The pound, however, is still down 0.03% on the day as the US dollar rises on data showing that US retail sales unexpectedly rebounded in August.
Retail sales rose 0.3% last month and the US dollar has remained close to its recent highs, supported by views that the Federal Reserve will continue to tighten policy aggressively. Recent data, including the surprise rise in consumer prices in August, have reinforced the bullish case for the dollar, as investors anticipate a third consecutive 75 basis point hike in interest rates next Wednesday.
Meanwhile, the Bank of England is expected to hike another 50 basis points on Thursday, September 22, but it remains a close call between 50 and 75 basis points due to rising recession risk. Analysts at Danske Bank argue that the Bank of England has had a tendency to surprise to the dovish side in recent meetings. Furthermore, the Bank of England was the first G10 central bank to forecast a recession in Q4 2022 at its last meeting, while using a much more dovish market price as policy input than what is currently quoted.”
Analysts expect 50 basis point hikes in September, November and December, followed by a final 25 basis point hike in February 2023. The final point rises to 3.25% (from 2.50%). We see the possibility of further hikes in 2023, if we see that underlying inflationary pressures are persistent.”
On the political side, analysts are citing the newly elected Prime Minister, Liz Truss, as planning to raise inflation in the future if it turns out to be more persistent. This could underscore the need for further hikes in 2023, although amid uncertainty over deficit financing we are still leaning 50 basis points next week.”
Technical levels
Source: Fx Street
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