GBPUSD year forecast
What can we expect from the Bank of England?
Technical analysis of the GBP/USD pair
The Bank of England emphasizes that economic data will be decisive in the monetary tightening cycle
At the end of 2021, the Bank of England was among the first central banks to raise interest rates as part of a monetary tightening cycle to curb inflation. Despite facing challenges, the bank persisted in raising rates to address the highest levels of price increases seen in over 40 years. However, current expectations suggest that recent financial pressures will impact the global economy, leading to cracks in interest-sensitive parts of the economy that may be more severe than those seen in decades past. Interest rate cuts are anticipated, and it is expected that some central banks will begin to ease policy before the year's end.
What can we expect from the Bank of England in its May meeting?
Although the markets are expecting the Bank of England to abandon its peak monetary tightening cycle soon, most expectations still support the bank's decision to raise interest rates by 25 basis points, bringing the final interest rate to 4.50%. Despite some signs of slowing inflation rates, the economy still faces challenges from various factors such as the Russia-Ukraine conflict, Brexit, and banking crisis fears. However, the Bank of England's members have emphasized the need to continue raising interest rates if inflation shows any signs of re-emerging while keeping their options open in recent statements.
From mid-December 2022, the GBP/USD pair has been trading within a sideways range, bounded by a horizontal channel. During this period, the main support level for the pair was around 1.1800, while the key resistance level was at 1.2350, which has now become a support level. However, the pair managed to break above the upper limit of the channel and reached its highest price for the year at 1.2537 before retracing back to test the support at 1.2350
If the GBP/USD pair manages to sustain its position above the support level at 1.2350, there is a possibility that it may test the resistance level at 1.2537. If the pair manages to break above this resistance level, it could extend the uptrend to test the 1.2650 level, and breaking that level could contribute to further gains towards 1.30, and even 1.33.
However, it is important to note that all of this is dependent on the pair maintaining support at 1.2350. In the event that the pair falls below this support level, it is highly likely that it will return to trading within the wide-ranging horizontal channel and possibly decline to test the support level at 1.2180. Breaking below this level could extend the decline to test the lower limit of the horizontal channel, which is around 1.1800.