The GBP/USD pair jumped sharply after the latest US inflation data and after a strong warning about tightening by the Bank of England (BOE) chief economist. The pair fell to a low of 1.3533, which was slightly lower than last week’s high of 1.3628.
BOE economists warning on rate hikes
The BOE has become one of the most hawkish central banks recently. In December, the bank caught investors by a surprise when it decided to hike rates by 0.25%. At the time, most analysts were expecting the bank to leave rates unchanged and then point to increases this year.
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The BOE then followed that hike with another one last week. That was the first time since 2004 that the BOE has implemented back-to-back rate hikes.
With inflation rising and the unemployment rate falling, analysts expect that the bank will implement at least three more hikes this year.
However, in a statement on Wednesday, the bank’s chief economist warned against an aggressive period of rate hikes. He argued that the bank should be data-dependent and hike interest rates gradually. By being aggressive, the bank risked causing shocks to sensitive industries like real estate.
It is unclear whether the BOE will heed to his call. Later on Thursday, Andrew Bailey will likely clear the air about this when he delivers a speech.
The GBP/USD also rose after the strong American inflation data. The data showed that the US inflation increased from 7.0% to 7.5% in January while core CPI jumped to 6.0%. Sadly, the situation will likely worsened as the Ukrainian situation worsens.
The numbers came a few days after the US published strong non-farm payrolls data meaning that the Fed will likely be more aggressive. The next key catalyst for the GBP/USD will be the latest US GDP data scheduled for Friday.
GBP/USD forecast
The four-hour chart shows that the GBP/USD jumped after the hawkish statement by the BOE last week. It jumped and tested the key resistance level at 1.3626, which was the highest level since January 20th.
Recently, however, the pair has given up those gains and moved slightly below the first support of the Andrews pitchfork tool. It also declined to the 38.2% Fibonacci retracement level.
Therefore, there is a likelihood that the price will keep falling as bears target the next key support at 1.3550.
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Source: https://invezz.com/news/2022/02/10/gbp-usd-forecast-after-the-strong-us-inflation-data/