British Pound Talking Points
GBP/USD continues to retrace the decline from earlier this month regardless of the restricted response to the UK Consumer Price Index (CPI), however the Federal Reserve rate of interest resolution might undermine the current rebound within the alternate price if the central financial institution steps up its effort to fight inflation.
Fundamental Forecast for British Pound: Neutral
GBP/USD halts a three-week decline because it extends the rebound from the yearly low (1.1760), and the alternate price might stage a bigger restoration over the approaching days because it initiates a collection of upper highs and lows.
However, the Federal Open Market Committee (FOMC) price resolution might affect the near-term outlook for GBP/USD because the central financial institution is predicted to ship one other 75bp price hike, and Chairman Jerome Powell and Co. might put together US households and companies for a restrictive coverage because the central financial institution struggles to curb inflation.
In flip, the current rebound in GBP/USD might prove to be a correction within the broader development because the FOMC seems to be on observe to implement larger rates of interest all through the rest of the yr, however a shift within the ahead steerage for financial coverage might lead to a bigger restoration within the alternate price if the committee appears to take a break from its mountain climbing cycle.
With that stated, GBP/USD might proceed to retrace the decline from earlier this month ought to the FOMC lay out plans to preserve the Fed Funds price round impartial, however the alternate price might wrestle to retain the advance from the yearly low (1.1760) if the central financial institution stays on observe to implement extra price hikes in 2022.
— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong
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