GBPUSD will look to extend its recent rally following the Fed’s pause, and UK inflation data will be released to start the week.
GBPUSD – Weekly Chart
GBPUSD has cleared a double resistance on the weekly chart at 1.2667 and must now hold that level this week in order to continue its gains.
The first data of the week will be British inflation, which is expected to fall slightly to 8.5%. The pound has been volatile this year as analysts have been wrong about the path of the country’s stubborn inflation, which has been above 10% for seven months out of eight.
Inflation is becoming more critical as the Bank of England meets on Thursday. Will the bank raise rates by another 25 basis points, as the ECB has? Or should the Federal Reserve be put on hold?
With high inflation, another rate hike is more likely, and some traders believe a 50 basis point increase is possible.
A significant increase, according to Sandra Horsfield of investment bank Investec, would be “aggressive,” and there was “little sign the medicine was taking effect” in slowing the wage spiral.
This week, Federal Reserve Chair Powell will testify before the United States Congress for two days.
There may be few surprises following an interest rate pause, with the door left open based on economic data. However, it is possible that the GBPUSD will move after the release of the data. The British pound has risen this year as the country’s central bank raised interest rates and the economy outperformed gloomy forecasts.
The pound versus the US dollar broke through resistance last week, but further gains in the forex market will be dependent on positive data.