GBP/USD to watch closely this week
After the FOMC and Bank of England meetings this week, GBP/USD could be volatile in forex this week.
The Bank of England is meeting on Thursday this week to discuss interest tax policy. The markets are banking on almost two-thirds of the chances of a 75 basis point hike, which would bring the key rate to 3%. The latest inflation reading for September is turnover at July’s level at 10.1% year-on-year, the highest level in 40 years. Core CPI reached in September is above all-time high at 6.5% year-on-year. Rise attentions have been rather erratic over the past month, as former Prime Minister Liz Truss unveiled her “mini-budget” proposal, which sent 30-year gilts above 5% and The GBP/USD all time highs have never been recorded. The BOE entered the Gilt market and saved the day. Liz Truss has resigned. Carrots and the pound are straightened. Rishi Sunak has been chosen to be the new PM. One of Sunak’s first orders of the day was to push back the declaration of the autonomous budget from October 31 to November 17 in an attempt to find 50 million pounds in tax revenue. Enter the BOE rate decision this week. Due to budget uncertainty ahead of Nov. 17, the BOE might want to tread lightly so as not to step on Sunak’s toes. Although inflation is extremely high, expectations of a recession are looming and the BOE might not want to consider equilibrium before the fall budget. At the same time, traders should monitor QT’s comments. Sales of gilts were scheduled to begin Nov. 1. However, traders should monitor the duration and pace of bond sales. Plus, along with some other “hub” central banks, tell them the RBA and BOC, the BOE also resents the need to cut spending. Chances are the BOE will pivot, as rates are still too low to ease at 10%+ inflation.
The US FOMC met once a week to discuss exchange rate policy. A 75ps rate hike is 90% priced in according to the CME FedWatch Tool. next week’s decision of 75 basis points seems unlikely to change…” Although the CPI fell slightly in September to 8.2%, it remains well above the Fed’s 2% target Watch out for October non-farm payrolls due out Friday at +220k by 75 basis points to take the fed funds rate to 4%, however Timiraos also pointed out that it could be heavily discussed during of this meeting if the Fed should begin to slow the pace of rate hikes in December, perhaps to 50 basis points This would bring the target tax to 4.5%, many economists estimate that the final tax will be 4 .75% or 5%.Watch the statement and the press conference carefully. ur know when and if a pivot awaits us.
The course of the pair GBP/USD Broke the 1.3000 mark April 22 and had been moving lower in the forex in a descending channel until September 21 when the pair broke the lower trendline near 1.1360. Two days later, Liz Truss announced her “mini-budget” proposal, and the pair fell to a positive base of 1.0834. On Monday morning, the GBP/USD pair reopened and fell to its lowest ever forex level near 1.0357 before the Bank of England entered the Gilts market and prevented the economy to collapse. GBP/USD bounced after in a rising wedge formation as price traded at a short-term high near 1.1645 (just above the level of the 61.8 Fibonacci retracement of the August 10 highs at 26 September lows at 1.1543). The GBP/USD pair is currently closing in on the morning of the wedge.
GBP/USD daily chart
There is already a confluence of support just below the lower ascending trendline of the rising wedge, the October 17 highs and the 50-day moving average between 1.1440 and 1.1463. Below, the price may drop to the 38.2% Fibonacci retracement levels, taken from the September 26th low to the October 26th high at 1.1153, after the lower trendline of the long-term channel near 1.1110. However, if the support confluence holds and the price rebounds, the first resistance is at the October 26 high at 1.1654. Above it, GBP/USD can be happy to see the uptrend line rise above 1.1690 and then see the uptrend line drop above the long term channel above 1 ,1900.
GBP/USD 4 hour chart
With the FOMC meeting and the BOE meeting this week, the GBP/USD pair could be volatile in the forex. It seems likely that both central banks rose 75 basis points at their respective meetings, but statements and press conferences should be watched closely for any hint of a ‘pivot’ in monetary policy going forward. .
By Joe Perry, CMT, FOREX.com » Official Site
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