The GBP/USD pair has been in a strong bullish trend in the past few days and is now at its highest level since February 2.
- Buy the GBP/USD pair and set a take-profit at 1.2400.
- Add a stop-loss at 1.2200.
- Timeline: 1 day.
- Set a sell-stop at 1.2283 and a take-profit at 1.2200.
- Ads a stop-loss at 1.2325.
The GBP/USD price continued its recovery process after the latest interest rate decision by the Federal Reserve and the strong UK consumer inflation data. It rose to a multi-week high of 1.2335, which was much higher than this month’s low of 1.1807.
The Bank of England will finalize its two-day meeting on Thursday and deliver the second decision of the year. This will be a closely-watched decision considering that the UK is facing one of the worst inflation in recent memory.
Data published on Wednesday showed that the country’s inflation remained at an elevated level. Core inflation, which strips the volatile items, rose to 5.6% in February while the headline CPI jumped to 10.6%. The two figures rose on a month-on-month basis, catching many analysts by surprise.
Therefore, the BoE will grapple with how to handle the situation together with the ongoing bank challenges. Analysts expect that the bank will carry on with a 0.25% rate hike, pushing the headline lending rate to 4.25%. It will then point to a pause in May as it reviews the impact of the last rate hikes.
The BoE is also grappling with the state of the banking sector, where several banks have collapsed. In the United States, banks like First Republic and PacWest remain on life support as officials work to save them. The UK banking system has been stable but the situation could change.
The BoE decision comes after the Federal Reserve decided to push on with a 0.25% interest rate increase. This was 25 basis points lower than what Jerome Powell had said two weeks ago. In the press conference, Powell said that a few officials in the committee voted for a strategic pause. He also said that more rates were coming if needed and that it won’t consider cutting rates this year.
The GBP/USD pair has been in a strong bullish trend in the past few days and is now at its highest level since February 2. The uptrend is being supported by the 50-period moving average and the Ichimoku cloud. It has also moved to the 78.6% Fibonacci Retracement level while the Relative Strength Index has moved slightly below the overbought level.
Therefore, trend-following principles suggest continuing to buy and hold the pair as long as it is above the 50-period moving average. As such, the next level to watch will be at 1.2400.
