EUR/GBP, GBP/USD and GBP/JPY await BoE rate decision
Outlook on EUR/GBP, GBP/USD and GBP/JPY ahead of a widely anticipated BoE rate hike.
EUR/GBP recovery pauses ahead of BoE rate announcement
EUR/GBP's strong rally over the past couple of days to Thursday morning’s £0.886 high is taking a breather ahead of the Bank of England’s (BoE) rate decision which is expected to be for an eleventh consecutive rise by 25 basis-points (bp) to 4.25%.
The 55-day simple moving average (SMA) at £0.8835 may offer short-term support and, if fallen through, the mid-February low at £0.8804. Further down sits the 22 February £0.8784 low.
While £0.8784 underpins on a daily chart closing basis, further upside is likely to be witnessed over the coming days with the February-to-March downtrend line and early March high at £0.8896 representing the first upside target.
GBP/USD rallies ahead of BoE rate decision
GBP/USD formed another bottom in early March, just as it did in early January, and seems to be on track to head back up towards its December and January highs at $1.2446 to $1.2448 as the BoE is expected to continue to hike its rates while the Federal Reserve (Fed) has adopted a more dovish tone.
At Thursday’s monetary policy meeting the BoE is widely expected to hike its rates by at least 25 bp to 4.25%, its eleventh hike in a row, especially since inflation came in much stronger-than-expected at 10.4% year-on-year (YoY) in February versus 10.1% in January and thus proves to be sticky in the UK. The different stages the BoE and Fed seem to be at with regards to reaching their terminal rates, with the British central bank expected to hike several more times, whereas the Fed might have reached its pivot, even if it doesn’t say so, should lead to further GBP/USD strength.
The rise and daily chart close above the $1.227 mid-February high on Wednesday is technically significant and increases the odds of the $1.25 region being reached, especially if another daily chart close above $1.227 occurs after the BoE’s rate announcement. Minor support can be found at the 24 January $1.2263 low and at the $1.2204 mid-March high with further support coming in along the 55-day SMA at $1.2151.
GBP/JPY resumption of uptrend may be boosted by BoE rate hike
GBP/JPY, which has been slipping from its ¥166.01 February high as investors bought the Yen on flight-to-safety flows during the recent banking crisis but seems to have levelled out at last week’s ¥158.57 low with Thursday’s probable BoE rate hike perhaps pushing the cross upwards once more.
A rise above Wednesday’s ¥163.34 high would likely lead to the 10 March high at ¥164.31 being overcome with the ¥166.01 February peak then being back in sight.
For this scenario to remain valid, last week’s low at ¥158.57 needs to hold, though. Above it minor support can be spotted at the 13 March low at ¥160.05.
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