The British pound reversed Thursday and is in positive territory. GBP / USD is currently trading at 1.3672, up 0.41% on the day.

The BoE should stay the course

The BoE is in a tough spot as recent economic data shows the recovery is stumbling, while inflation remains well above target. Just before the meeting, the August manufacturing PMI slowed to 56.3 from 60.3. The BoE began cutting its quantitative easing program in May, but the timing of a rate hike remains uncertain. ING noted that financial markets expect the BoE to hike rates in the second quarter of 2022, but do not expect a hike until the end of next year. The BoE is unlikely to give much information on interest rate policy at today’s meeting, but investors will be interested to see if the Bank continues to insist that the recent spike in interest rates. inflation is transient.

At the FOMC policy meeting on Wednesday, policymakers signaled to markets that the Fed is ready to begin its withdrawal by the end of the year. However, no commitments have been made, as Fed members said in the rate release that if progress continues as planned, “a moderation in the pace of asset purchases may soon be warranted.” Fed Chairman Powell added in the follow-up comments that the Fed “could easily move forward at the next meeting, or not, depending on whether these tests are met.” Powell kindly circled the two key areas the Fed is watching ahead of a slowdown – inflation is well above the Fed’s target of 2%, while unemployment, which has fallen to 5.2%, is still higher. way to go before reaching the Fed’s target. .

The Fed’s dot plot indicated a slightly more hawkish stance, as nine members are now forecasting a rate hike in 2022, down from seven previously. The Fed is cautious about rate hikes, showing that it is in no rush to increase even if a cut looks imminent.

GBP / USD technical analysis

  • There are resistance lines at 1.3851 and 1.3975
  • The pair continues to test support at 1.3666. Below there is support at 1.3605

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