GBPUSD Preserves Bullish Trend on BoE Policy- Key Resistance Ahead
Fundamental Forecast for the British Pound: Neutral
The British Pound tracked higher during the first full week of September, with the GBPUSD climbing to a high of 1.5680, but the bullish trend may be coming to an end as the pair comes up against key resistance.
Indeed, the U.K.Jobless Claims report highlights the biggest event risk for the week ahead as we’re expecting to see another 21.0K decline in the figure, but the fresh batch of central bank rhetoric from the Bank of England (BoE) may keep the sterling float as Governor Mark Carney is scheduled to testify in front of the U.K. Parliament’s Treasury Committee on September 12.
Indeed, the BoE refrained from releasing a policy statement after keeping the benchmark interest rate at 0.50% while maintaining the Asset-Purchase Facility at GBP 375B, and it seems as though there was another unanimous vote to maintain the current policy as the economic recovery in the U.K. gradually gathers pace. As the Monetary Policy Committee (MPC) pledges to reinvest the proceeds of the Gilts due to mature this month, it seems as though the central bank will continue to utilize its forward-guidance for monetary policy to further address the persistent slack in the real economy, but it seems as though the central bank may have little choice but to move away from its easing cycle as inflation stubbornly holds above the 2% target.
In turn, the BoE Minutes due out on September 18 may show a growing number of central bank officials drop their dovish tone for monetary policy, and the MPC may put a more hawkish twist on its forward-guidance as the economy gets on a more sustainable path.
From a technical standpoint, the 38.2% Fibonacci retracement of the 2009 range (1.5680-90) may continue to serve as it struggled to close above the key figure in August, and the pair may ultimately threaten the upward trending channel dating back to July should the BoE testimony fail to dampen bets for additional monetary support. As a result, the GBPUSD may face a near-term correction in the days ahead, and the pair may trade within a broad range over the near to medium-term as market participants weigh the outlook for monetary policy. - DS