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GBP/USD rebounds on risk appetite improvement, BoE’s rate hike expectations

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  • GBP/USD rises 0.22% as market sentiment remains upbeat, with NVIDIA earnings and BoE rate hike prospects in focus.
  • Interest rate differential between the US and UK narrows, potentially pushing GBP/USD towards the YTD high of 1.3147.
  • Technicals indicate resistance at the 50-DMA of 1.2791; a breach could target 1.2995, while support lies at 1.2700 and 1.2620.

GBP/USD erases last Friday’s losses and climbs above the 1.2750 figure though it remains trading subdued amidst the lack of catalyst involving the Sterling (GBP) and the US Dollar (USD). US Treasury bond yields rise, but the US Dollar (USD) is pressured ahead of the Jackson Hole Symposium. At the time of writing, the GBP/USD is trading at 1.2760, registering gains of 0.22%.

Sterling gains traction ahead of Jackson Hole Symposium, with eyes set on the 1.3000 milestone

In the meantime, market players’ mood remains positive, as earnings from the chipmaker NVIDIA are set for release on Wednesday. Hence, high beta currencies like the GBP post gains propelled by sentiment and expectations for further tightening by the Bank of England (BoE), with traders pricing in a 25 bps rate hike, to 5.50%.

Therefore, the interest rate differential between the US and the UK will close, and with the BoE ready to raise rates at least twice, towards the 5.75% area, the GBP/USD could resume its uptrend and challenge the 1.3000 figure ahead of testing the year-to-date (YTD) high at 1.3147.

In the week ahead, the UK economic docket will feature the CBI Industrial Trend Orders, S&P Global PMIs, and the GfK Consumer Confidence. On the US front, the agenda will feature Fed speakers, housing data, S&P Global PMIs, Durable Good Orders, unemployment claims, and the Federal Reserve (Fed) Chair Jerome Powell’s speech on Friday.

GBP/USD Price Analysis: Technical outlook

The GBP/USD price action remains neutral to downward biased, capped by the 50-day Simple Moving Average (DMA) at 1.2791, a barrier that keeps the pair from reaching the 1.2800 figure. A breach of the latter would expose the July 27 daily high at 1.2995. Conversely, if GBP/USD sellers drag the spot price below 1.2700, the pair could test the August 3 daily low of 1.2620 before dipping towards the 200-DMA at 1.2382.

GBP/USD Price Action – Daily chart

 

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