The Bank of England’s (BoE) easing cycle is likely nearing completion due to another surge in UK inflation. The British central bank is expected to keep interest rates at 4% in the short term. Further reductions are uncertain, especially if consumer prices do not decline to the target level. Data released on Wednesday will highlight the current headwinds for the national economy. August’s inflation is projected to remain at 3.8%—the highest level since January 2024. In September, it has the potential to reach 4%, doubling the 2% target. The BoE is particularly concerned about a sharp rise in food prices, given their importance to consumers. Last week's data showed that household inflation expectations hit a two-year high.
Money markets, which had fully priced in a 3.75% rate by December, now see little chance of further easing this year. They anticipate an additional reduction of slightly more than 40 basis points by the end of 2026, down from nearly 60 basis points expected before the August 7 meeting.
Under these circumstances, the GBPUSD currency pair is showing signs of moderate appreciation with upside potential in the near future. The current price is 1.11% above the 50-day moving average, indicating building bullish momentum, and 3.34% above the 200-day one, confirming a long-term uptrend. The RSI is at 62.04, suggesting that the pair is gaining strength but has not yet reached overbought territory.
The overall recommendation is to buy GBPUSD, with Take Profit set at the level of 1.39880 and Stop Loss at 1.34440.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
