GBP/USD price, chart and analysis
- BoE is raising rates and will do so in the near future.
- British Prime Minister Johnson is back in the spotlight.
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EThe British pound remains reasonably priced after the Bank of England hiked interest rates by 25 basis points and revealed that 4 out of nine members eligible to vote were calling for a 50 basis point hike. An updated inflation outlook, with price pressures rising above 7% in the spring before easing, kept the aggressive theme alive and supported market expectations of a further 120 basis points in rate hikes this year, with key interest rates expected to hit 1% in May .
Hawkish Bank of England (BoE) Raises Rates 0.25%, Sterling Rises
While the background to monetary policy is becoming clearer by the day, the political background, particularly how long British Prime Minister Boris Johnson can hold the keys to 10 Downing Street, is becoming increasingly murky. On Thursday, four senior members of Prime Minister Johnson’s staff left their posts – at least a short-term cut in wages – with all saying they had resigned over various conflicts with the prime minister. However, three of the four were embroiled in the partygate scandal and some sources suggest they may have decided to jump before being pushed. Either way, losing high-ranking staffers is not a good situation for the prime minister, who continues to be under pressure not only over the partygate scandal, but also because of ill-advised comments to the opposition leader in the House. Added to this is the continued trickle of MPs filing a no-confidence vote against the Prime Minister at the 1922 commission and the Prime Minister’s prospects look increasingly bleak.
Sterling is likely to weather any change in leadership after a brief period of volatility, with the BoE’s willingness and commitment to tackle inflation, the likely driving force behind sterling. GBP/USD is just outside of Thursday’s multi-day highs and appears to be creating a margin against the greenback. The US dollar has also lost some of its recent gains as other central banks stepped up their monetary tightening. The ECB suggested yesterday that its APP program could end sooner rather than later, opening the door to rate hikes later in the year.
The initial resistance level for GBP/USD is at 1.3749 and it may take some time to break through convincingly. Support is seen at 1.3515 for 1.3412, with the latter level likely to hold in the near term. The GBP/USD range may be trading in the near future.
GBP/USD Daily Price Chart – February 4, 2022
Show retailer data: 51.38% of traders are net long with the trader long to short ratio at 1.06 to 1. The number of net long traders is 5.76% higher than yesterday and 9.88% lower than last week, while the number of net short traders is 5.93% lower than yesterday and 21.78% higher than last week.
We tend to oppose crowd sentiment, and the fact that traders are net long suggests that GBP/USD prices may continue to fall. The positioning is more net long than yesterday, but less net long than last week. The combination of current sentiment and recent changes gives us further mixed GBP/USD trading bias.
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