GBP / USD down ahead of BoE and Fed meetings

GBP / USD price, news and analysis:

GBP / USD is weakening ahead of tomorrow’s monetary policy decision from the US Federal Reserve and Thursday’s political announcement from the Bank of England.

Federal Open Market Committee is expected to decide to shut down its bond buying program, but opinions are divided on whether the Bank of England will raise UK interest rates or leave them where they are.

GBP / USD down in the short term

GBP / USD looks weak ahead of central bank meetings this week in the US and UK, and it is difficult to see a short-term upside for the pair as the markets are fully trading at a 15-point rate hike in the United Kingdom. the risk is that the Bank of England’s Monetary Policy Committee decides to leave rates unchanged, causing the GBP / USD pair to fall further. On the contrary, it is unclear how there could be a harsh surprise from the BoE.

As for the US, it would be a shock if the Federal Reserve fails to cut its monetary stimulus program, but the USD is still likely to benefit at the expense of currencies like the British pound.

GBP / USD price chart, daily time frame (April 13 – November 2, 2021)

Source: IG (you can click on it to see a larger image)

Bank of England to raise rates?

While markets have largely priced in a rate hike in the UK, economists aren’t so sure. In polls conducted by Reuters and Bloomberg news agencies, analysts who asked that their views be roughly evenly divided between those who expect a rate hike and those who do not expect any change. It is also unclear whether MPC voters will be unanimous on their verdict, which seems unlikely and could be an additional drag on the pound.

A ray of hope for the British pound

On the positive side of the British pound, France appears to have pulled out of a full-scale showdown with the UK over fishing rights. This was not expected to be a major factor in the markets, but it is still cararately favorable for the British pound. However, IG’s customer positioning data supports the argument for a weaker pound.

Retail Trader Data for GBP / USD shows that 56.14% of traders are net longs, with a ratio of long / short traders equal to 1.28 to 1. number of net long traders is 6.90 % higher than yesterday and 19.41% higher than last week, while the number of net short traders is 5.57% higher than yesterday and 14.52% lower than last week.

Here at DailyFX, we generally have a contrary view of crowd sentiment and the fact that traders are net long suggests that GBP / USD prices may continue to fall. Traders are longer than yesterday and the week. past, and the combination of current sentiment and recent swings gives us a stronger GBP / USD downside trading trend.

– Written by Martin Essex, Analyst

Feel free to contact me at @MartinSEssex

Read also USD / JPY will trade in August as US Treasury yields remain afloat.

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