GBP/USD Price Analysis – June 22, 2023

Daily Price Outlook

The GBP/USD pair has risen to 1.2847 today, just slightly below the 61.8% projected level of 1.1801 to 1.2678 from 1.2306 at 1.2848. Currently, the intraday bias is leaning towards the upside.

The Bank of England (BoE) is expected to raise interest rates for the thirteenth consecutive time in its upcoming meeting as it continues to combat persistently high inflation rates in the United Kingdom.

Despite a decrease from double-digit levels, the UK still maintains one of the highest rates of consumer price inflation among major advanced economies.

Market attention will primarily focus on the language of the BoE’s monetary policy statement for any indications regarding its rate hike outlook, as Governor Andrew Bailey’s news conference and revised economic estimates will be absent.

The GBP/USD pair is maintaining its rebound gains below 1.2800, while the US Dollar (USD) lingers close to monthly lows following a sell-off triggered by less hawkish remarks from Fed Chair Jerome Powell during his testimony before the House Financial Services Committee.

Powell emphasized that inflation pressures remain high and that the process of bringing inflation back down to 2% will take time.

Recent UK inflation data, particularly the Core CPI index, which reached its highest rate since March 1992, has influenced market expectations for a 25 basis points (bps) rate hike by the BoE in June.

The likelihood of a 25 bps or 50 bps rate increase has divided investors, with the current estimate leaning toward a 25 bps hike.

Market caution prevails due to concerns about additional central bank actions, with US Treasury bond yields trading near weekly lows and US S&P 500 futures slightly lower. Besides the BoE policy statements, the US Jobless Claims and Powell’s ongoing deposition will also garner attention and influence the short-term direction of the GBP/USD pair.

The BoE is anticipated to release its monetary policy decision and meeting minutes on June 22, with expectations of a 25 bps increase in the benchmark interest rate to a 15-year high of 4.75%. Governor Bailey highlighted the tight labor market and the prolonged duration of inflation’s decline.

The recent UK inflation data supports the notion that the BoE will need to continue with interest rate hikes to address elevated inflation levels.

The GBP/USD pair lacks a clear intraday direction and remains range-bound above the mid-1.2700s as market participants await the BoE policy decision. Wednesday’s hotter-than-expected UK consumer inflation data and optimistic job statistics have increased expectations for tightening monetary policy by the BoE.

Fed Chair Powell’s remarks regarding the fight against inflation and the likelihood of future rate increases have restrained negative USD sentiment, thus limiting downward pressure on the GBP/USD pair.

Overall, the recent pullback from a 14-month high suggests that the path of least resistance for spot prices is higher, indicating a potential upward trajectory for the pair.

GBP/USD Price Chart – Source: Tradingview

GBP/USD – Technical Analysis

The GBPUSD pair continued its upward movement, testing the resistance line at 1.1940. However, it remains stable below this level, with the EMA50 providing additional strength to the resistance. The pair is anticipated to resume its corrective bearish wave, targeting the key level at 1.1625.

The Stochastic oscillator is currently displaying clear negative signals, indicating a potential decline in the upcoming sessions. The price action is confined within a bearish channel visible on the chart.

Hence, our bearish outlook remains valid and active. It is worth noting that a breakthrough above 1.1940, followed by 1.2020, would invalidate the expected decline and lead to a price recovery.

At 11:00 AM, the Bank of England (BOE) released its monetary policy decisions. The MPC Official Bank Rate Votes showed a unanimous decision of 7-0-2, indicating that all seven members voted to maintain the current bank rate, while two members voted for a rate cut.

The Monetary Policy Summary provided an overview of the BOE’s assessment of the economy and its policy outlook.

The Official Bank Rate remained unchanged at 4.50%. This decision reflects the BOE’s commitment to supporting the economy and ensuring price stability. Let’s also keep an eye on it.