GBP/USD range-bound amid UK/US rate hike anticipation

<p>The pound continues to vie closely with the US dollar with respect to anticipation of interest rate hikes as the GBP/USD currency pair (daily chart shown […]</p>

The pound continues to vie closely with the US dollar with respect to anticipation of interest rate hikes as the GBP/USD currency pair (daily chart shown below) consolidates in a relatively tight trading range. With both Federal Reserve Chair Janet Yellen and Bank of England (BOE) Governor Mark Carney recently issuing rather hawkish statements, the question of timing with respect to the rate hikes has been the primary topic of speculation.

On the UK side, the BOE will release its official bank rate votes on Wednesday, which should provide a clearer indication as to the degree of hawkishness present in the BOE’s Monetary Policy Committee.

Counterbalancing the pound’s recent strength based on this rate hike speculation, however, has been the persistent strength of the US dollar, as the Fed has also signaled its own potentially impending rate hike.

GBP/USD Daily Chart


This rate rivalry has resulted in days of relatively indecisive price action for GBP/USD as the currency pair has traded in a moderately bearish trading range since mid-week last week, with multiple ‘spinning top’ candles just above both the 50-day moving average as well as the key 1.5500 support level.

This trading range consolidation occurs as GBP/USD continues to trade with mostly a bearish trend bias, as it has for the past month since its June year-to-date highs above 1.5900.

In the event of a breakdown below the noted 1.5500 support level, continued US dollar strength could help push the currency pair back down towards its 200-day moving average, where a one-month low was established just two weeks ago. Below the 200-day average is a major downside support target at 1.5200, which is the area of the early June lows.

To the upside, short-term resistance within the context of the current trading range currently resides around the 1.5675 level.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.