GBP/USD: Prospects for Recovery As BoE Considers Tapering

Summary:

The BoE is considering halting its bond-buying program due to rising inflation, according to VP Saunders. The GBP/USD halts decline.

Bulls truncated intraday losses on the GBP/USD after Bank of England policymaker Michael Saunders said the BoE might stop its asset purchase program due to a shock rise in UK inflation.

The comments by Saunders echo those of departing chief economist Andy Haldane, who was the lone voice calling for the BoE to end its bond-buying program. Saunder’s position brings to two the number of BoE policymakers who are starting to shift away from the dovish stance of BoE Governor Andrew Bailey.

UK Claimant count change had dropped from 151.4K to 114.8K, with 356K jobs added to the Uk economy. Wage growth is now at 21-year highs, and inflation data showed a 2.5% rise annually in June, with projections that it could rise to 4% at the end of the year.

However, the pair continues to face headwinds from the coronavirus delta variant and fears that the economy may have opened too quickly. Furthermore, the impact of recently concluded Euro 2020 on the COVID-19 infection numbers is still to be assessed. The WHO had expressed concerns over the crowds gathering in stadiums and in pubs to watch the games.

The GBP/USD trades 0.23% lower as of writing.

Technical Outlook for GBP/USD

The pair has to lift off from the 1.38126 support after an intraday bounce at that area and clear the resistance levels at 1.38616 and 1.39484 for a recovery to start looking feasible. Above these levels, 1.4005 and 1.40602 look like potential targets if the advance continues.

On the other hand, a collapse below 1.38126 allows the bears to aim for recent lows at 1.37463. This scenario leaves 1.36771 and 1.36117 as potential downside targets if there is a major decline.