empty
24.09.2024 10:49 AM
Bullish Momentum for the Pound Gains Strength

The Bank of England, as expected, kept the interest rate at 5% during the meeting that concluded last week, with votes split 8 to 1 instead of the anticipated 7 to 2, indicating a more hawkish stance than expected.

The BoE maintained a significant portion of its previous recommendations, stating that policy will remain restrictive until inflation returns to target. When that will happen is quite unclear, as the latest report showed an increase in the core index in August from 3.3% year-on-year to 3.6%, exceeding forecasts.

This image is no longer relevant

The NIESR Institute, in its baseline scenario, forecasts that overall inflation will rise from the current 2.2% to 2.8% by the end of the year. Even if this increase is due to base effects, it is unlikely that the BoE will start lowering rates at a pace comparable to the Federal Reserve. Currently, the market predicts only one rate cut this year, specifically in November, by 25 basis points, with the rate expected to be at 4.75% by the end of the year and 3.25% by the end of 2025. In contrast, the Fed's rate forecast is much more aggressive—by the end of the year, the futures market sees the rate in the 4.00/4.25% range, and it could drop to 3.25% as early as March. The dynamics favor the pound, and if this forecast materializes, the bullish momentum for the pound will gain additional strength.

Regarding the economy, signals from the UK are more favorable than those from the US. Retail sales growth in August exceeded all forecasts, indicating strong consumer demand and supporting inflation. PMI indices have slightly decreased but remain in expansion territory, which casts the UK economy in a favorable light compared to the US. Most fundamental factors suggest a pressure on expectations for a decline in the pound.

The net long GBP position adjusted by £2.2 billion in the reporting week, down to £5.18 billion. Positioning remains bullish, although the calculated price has lost direction.

This image is no longer relevant

The pound has overcome the resistance at 1.3266, which we previously identified as the nearest target, and has reached a 2.5-year high. From a technical perspective, the bullish momentum is strong, and there are no significant resistances until 1.4245. The slowdown in the calculated price is linked to the balance of forces ahead of last week's Fed meeting when the market consensus was that the Fed would raise rates by 25 basis points and that the US economy was far from recession. Both factors are no longer in play, so there are fewer bullish signals for the dollar, allowing the pound to take advantage of the situation and attempt to build on its success. The level of 1.3266 has turned into support, and buying is justified on a pullback to this level, while a deeper correction seems unlikely.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/JPY. Analysis and Forecast

During the European session on Thursday, the Japanese yen maintained stability, allowing the USD/JPY pair to hold above the key 143.00 level amid a moderate rise in the U.S. dollar

Irina Yanina 12:04 2025-06-05 UTC+2

AUD/JPY. Analysis and Forecast

Today the AUD/JPY pair is attracting new buyers. Recent Chinese data, including the private Caixin survey, showed a moderate acceleration in growth in China's services sector

Irina Yanina 11:36 2025-06-05 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair continues to decline. Fundamental factors support bearish sentiment, indicating that the path of least resistance for spot prices remains downward. Reports of a trade agreement between

Irina Yanina 11:33 2025-06-05 UTC+2

The Market Finds Good in the Bad

Markets have risen for the third consecutive day, interpreting the current situation as widespread trading uncertainty — far from a market crash. This allows for a calmer and more rational

Marek Petkovich 09:20 2025-06-05 UTC+2

What to Pay Attention to on June 5? A Breakdown of Fundamental Events for Beginners

There are very few macroeconomic reports scheduled for Thursday. Only two secondary reports from the UK and the US are all traders will get today. The construction sector activity report

Paolo Greco 06:39 2025-06-05 UTC+2

GBP/USD Overview – June 5: Britain Is America's Best Friend, but Still Has to Pay

The GBP/USD currency pair traded rather calmly on Wednesday, as there were few important events and reports during the day. As we expected, the business activity indices (excluding ISM)

Paolo Greco 03:52 2025-06-05 UTC+2

EUR/USD Overview – June 5: Trump Will Continue Pressuring the EU

The EUR/USD currency pair traded very calmly on Wednesday. As we mentioned yesterday, there was no reason to expect the business activity indices to influence trading — especially the European

Paolo Greco 03:52 2025-06-05 UTC+2

Trump Once Again Fails to Persuade Powell

Donald Trump and Jerome Powell held a meeting at the White House last week. This news went largely unnoticed due to the scant details provided. Only general information about

Chin Zhao 00:38 2025-06-05 UTC+2

EUR/USD. June ECB Meeting: Preview

On Thursday, the European Central Bank will announce the results of its next meeting. Although the formal outcomes of the June meeting are virtually predetermined, the future prospects for further

Irina Manzenko 00:38 2025-06-05 UTC+2

The Dollar Returns to the Battlefield

When there is no unity among allies, things don't go smoothly. Following mutual accusations between the U.S. and China, Donald Trump commented that Xi Jinping is a very tough

Marek Petkovich 00:38 2025-06-05 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.