GBP/USD has been sliding for the past two weeks as the Dollar gained strength. On Friday, the British pound to US dollar exchange rate showed a significant recovery during its London session. Till press time, the pair was trading at 1.286 after rising by 0.47%.
The British pound has been performing very well since the start of 2023. Despite the recent pullback, GBPUSD is still trading 7.2% above its yearly open. This is a very strong comeback for the sterling, which had a very rough 2022 due to the economic and political issues in the country.
The Bank of England (BOE) is set to meet next week for another decision on interest rates. Analysts now seem to be tilted more towards a 25 bps rate hike than the previous expectation of another 50 bps increase. This has made many short-term traders exit their long position on the GBPUSD ahead of the key decision.
The reason why analysts are expecting a dovish approach from BOE this time is because inflation has started to fall in the UK. The June CPI report revealed that the inflation in the country fell to 7.9% from 8.7% a month ago. This led to a weakness in GBP/USD.
The following chart reveals that despite a pullback, the British pound remains in the uptrend against the US dollar. The pair is respecting the upward trendline which is drawn on the chart. The GBP/USD forecast will remain bullish as long as the pair trades above this trendline.
In the coming days, GBPUSD is likely to remain volatile due to the BOE rates decision on August 3. If DXY extends its gains next week, the pound may keep sliding. However, there’s nothing to worry about as long as the above-mentioned trendline holds.
In the meantime, I’ll keep sharing the updated forecast on the British pound along with my personal trades on Twitter, where you are welcome to follow me.
This post was last modified on Jul 28, 2023, 12:52 BST 12:52