Bank of England, or BoE, the governor said the Financial Policy Committee -- set up after the great financial crisis to ensure the stability of the UK Financial system – was “on the case of securing financial stability,” allowing the central bank to focus on its “own important job of returning inflation to target,” Bailey said in a speech at the London School of Economics on Monday.
Bailey also signalled that the bank would be ready to deliver more monetary tightening if “signs of persistent inflationary pressures become more evident.”
The ongoing worries about price pressures come less than a week after the BoE hiked rates by 0.25% last week, revised its economic growth forecast higher, and flagged the strong labour market as a threat to inflation.
About 50% of traders expect the BoE to hike more times this year before a pause.
The less depressing growth economic outlook at a time when the UK government’s fiscal plan is on a much steadier footing than it was six months ago - when the then Prime Minister Lizz Truss’ mini budget sparked chaos – forced market participants to reassess their bearish calls on the pound. “We no longer look for idiosyncratic GBP weakness, as investor sentiment on the fiscal side has improved meaningfully,” Goldman Sachs said in a recent note.
On Tuesday, GBP/USD is trading above 1.2250. The recent pattern of higher highs has broken, while the higher lows are just about in place, following the 10 and 20 moving averages. All three moving standards are supportive, while the RSI indicator starts moving lower and out of extreme levels. The first level of resistance focuses on 1.2343 and 1.2361, while there is a cluster of 10 and 20 moving average support between 1.2274 and 1.2263. GBPUSD traders should wait for volatility to return to the pair before moving.
4-Hour Chart – GBPUSD (Rising Wedge Continues Growing)