GBPUSD will look to sustain its recent rally after the Fed pause, and UK inflation will start the week in data.
GBPUSD – Weekly Chart
GBPUSD cleared a double resistance on the weekly chart, and 1.2667 and now has to hold that level this week for further gains.
This week’s first data will be British inflation, with the market expecting a slight decline to 8.5%. The pound has been volatile this year after analysts have been wrong about the path of stubborn inflation in the country, which has been above 10% for seven months out of 8.
Inflation is more critical as we have a Thursday Bank of England rate meeting. Will the bank raise another 25 bps like the ECB? Or pause the Federal Reserve?
Another raise is more likely with the high inflation level, and some traders think a 50 bps hike is possible.
Sandra Horsfield from investment bank Investec said a significant hike would be “aggressive”, and there was “little sign the medicine was taking effect” in slowing the wage spiral.
This week will also see two days of testimony from Federal Reserve Chair Powell before the United States Congress.
There may be little surprises after a pause in interest rates, with the door left open dependent on economic data. However, it could move the GBPUSD after its data. The British pound has rallied this year as its central bank hiked borrowing rates and the economy outperformed gloomy expectations.
The pound versus the US dollar burst through resistance last week but will rely on positive data to help find further gains in the forex market.
