BOE

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.

GBP/USD extends the decline following the Federal Reserve rate decision as the Bank of England (BoE) unexpectedly keeps the Bank Rate at 5.25% in September.

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.

The GBP/USD is in focus ahead of this week’s key events: FOMC and BoE rate decisions. We also have UK CPI and retail sales, as well as global PMI figures to look forward to this week. The BoE is likely to deliver a final 25 bps hike, while FOMC is seen holding policy unchanged. The GBP/USD could be heading to low 1.20s in this busy week.

Whilst the Fed are expected to hold rates steady in September, next week’s FOMC meeting also includes the quarterly staff projections. And changes to dot plot or CPI estimates can be as good as a hike where market reactions are concerned. The odds of another BOE are next week are not as high as they were, which makes the preceding inflation report paramount to expectations for their next decision. And whilst the BOJ are unlikely to act, that is no reason to drop your guard given their tendency to surprise once in a while. We also have flash PMIs for major regions and inflation data to mull over.

Sticky wages growth is one of the few positives for GBP/USD right now, keeping the prospect for rate hikes from the BOE in play.

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.

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.

A 25-basis point rate hike was mostly priced in, especially in light of the latest inflation data that was released on Wednesday

GBP/USD rises ahead of BoE rate decision. Gold rises post Fed and looks to jobless claims.