- The British pound has risen but has failed to capitalize on a bid towards 1.3300 amid risk appetite in a risky market.
- The BoE’s Broadbent is unclear on how he will vote at the December meeting.
- GBP / USD Price Forecast: Short-term up, but GBP bulls need to rally 1.3264.
The GBP continues to advance during the American session, rising 0.12%, trading at 1.3255 at press time. Market mood has improved over the weekend as data from South Africa indicate that the Omicron variant is more contagious than alpha and delta; however, variant cases have been relatively mild.
In the European session, Bank of England (BoE) Governor Ben Broadbent said that the tight labor market will add pressure on inflation and he expects it to “comfortably exceed” 5% in April 2022. He further said that he did not know that It would have voted to raise rates in December, but made it clear that UK central bank forecasts showed a need for higher rates.
Despite the aforementioned, money market futures have reduced the possibility of a rate hike from the Bank of England at the December meeting, attributed to the uncertainty risks related to omicron. By contrast, in the US, investors expect at least two rate hikes by 2022, once the bond reduction process is completed in March of the same year.
In the past week, the market has witnessed a shift from Fed Chairman Jerome Powell’s neutral and dovish stance to an aggressive stance when he said he would favor a more rapid reduction in QE amid “eliminating” the word. “transitory” to inflation.
Apart from this, the UK economic calendar featured the November construction PMI, improving to 55.5 from 54.6 in the previous month. On the US front, an absent economic agenda and the Fed’s blackout would keep traders focused on the Consumer Price Index (CPI), which will be released on Friday.
GBP / USD Price Forecast: Technical Outlook
GBP / USD fell to 1.3225 in recent hours, followed by a bounce above the daily center pivot at 1.3249. The pair is approaching stiff resistance at the 50 hourly simple moving average (HSMA) at 1.3264, which, if broken, would give way to GBP bulls targeting the 100 SMA at 1.3282. Furthermore, the Relative Strength Index (RSI) is pointing up at 51.50, which means that the British pound still has the upper hand in the near term, unless it does not regain the 100 SMA.
On the other hand, if the USD bulls hold firm against the pound, the first support would be 1.3208, which, once broken, would expose the year-to-date low just 15 pips below it at 1.3194.