BOE

With plenty of major data and central bank speeches scheduled in the UK and Australia this week, the next few days may prove to be critical for the medium-term trajectory for GBP/AUD heading into 2024.

Ahead of the Bank of England’s rate decision, the GBP/USD was holding steady near 1.22 handle, benefitting slightly from the dollar’s weaker response to what was a hawkish hold from the Federal Reserve rate decision. Not many people were expecting a rate hike from the BoE either, with the market attaching a 93% probability of a second consecutive hold after 15 back-to-back interest rate hikes.

With no change to BOE interest rates expected, GBP/USD traders will key in on the BOE’s vote split and economic forecasts.

We have a busy calendar with what would usually be ‘red flag’ days, including central bank meetings with the FOMC, BOJ and BOE. There’s a reasonable chance we’ll see no action across all three, but the bigger response for global markets could be if the BOJ widen or abandon their yield curve control (YCC).

With GBP/USD sentiment so poor, and major US economic data arriving later this week, conditions look ideal for a countertrend squeeze over the coming days.

Earlier, the Bank of England announced interest rates would be kept unchanged in a surprise move (not to us) and the pound took another plunge, dropping below 1.2250 in initial reaction. The BoE’s policy statement was somewhat hawkish and the MPC split. This means that the next few policy decisions could be close calls, especially if inflation doesn’t come down fast enough.

Only a ‘hawkish hike’ from the Bank of England (BoE) is likely to be enough to turn around the fortunes of GBP/USD given rapidly weakening fundamentals.

The GBP/USD will come into sharp focus over the next couple days, with two pivotal events on the horizon: the FOMC and BoE rate decisions. Additionally, traders are anticipating the release of UK CPI and retail sales data, as well as global PMI figures this week. These developments collectively have the potential to shape the near-term GBP/USD outlook. UK CPI could sway BoE decision, with the UK central bank likely to mimic ECB's dovish hike. Meanwhile, the FOMC is likely to go for a hawkish hold.

Key events from US and UK taking place this week means the GBP/USD is facing a key test . As well some more top-tier US data in the next few days, we also have the Bank of England’s rate decision to look forward to. Our GBP/USD forecast could change materially by Friday. But for now, we are expecting moderate further downside, owing to the dollar’s overall positive trend.

If the global economy is showing signs of downshifting, GBP/USD may be particularly vulnerable...

Many analysts are attributing this week’s downdraft in GBP/USD to month- and quarter-end rebalancing ahead of the weekend, so there’s certainly potential for a bounce as we head into next week.

The BOE and SNB are expected to hike by 25bp today. But a 50bp hike may not be out of the question, which puts GBP/USD and USD/CHF firmly onto trader's radars today.

Despite struggling post the BoE rate decision, the longer-term GBP/USD forecast remains bullish. But in the short-term, a drop back to 1.25 cannot be ruled out.

Will the BoE boost the pound? USD/JPY falls despite dovish BoJ minutes & after cooling US CPI.

At 0.1% y/y, China’s consumer price inflation is at levels other economies can only dream of. Next up the BOE’s monetary policy decision.

The ongoing bullish GBP/USD forecast is likely to change only modestly as the Bank of England (BoE) is unlikely to deliver a dovish surprise with inflation remaining in double-digits.

US inflation and Thursday's BOE meeting are key events for GBP/USD traders to keep an eye on, ahead of the UK's data dump on Friday.