The GBP/USD currency pair was consolidating at the level of the annual maximum for the last week. Today it could be a retest of this resistance, as the Bank of England will have a meeting soon. Consumer inflation in the U.K. was released before the meeting.
The inflation rate in the country remains above the expected level for the fourth month in a row. According to investor forecasts, the country's key rate will peak at nearly 6%.
The Office of National Statistics reported Wednesday that the consumer price index rose to 8.7% in May. Core inflation, excluding food and energy, accelerated to 7.1%. Economists had expected the consumer price index to be 8.4%. The core indicator was predicted to remain unchanged at 6.8%.
According to investors' expectations, the Bank of England will raise its rate by 25 basis points to 4.75% on Thursday. The chances of a larger increase by 50 basis points are growing after the release of new inflation data.
Also Wednesday's inflation figures increase the chances of support for a larger rate hike, at least by one of the Bank of England's members, for example, hawkish Catherine Mann.
The Bank of England is likely to forecast a higher rate than previously expected. The increase by 0.5% would be a surprise. In this case, the British pound will accelerate growth against the U.S. dollar even more. In the minutes from the last meeting, the Bank of England committed to further tightening of monetary policy if there is signs of steady inflationary pressure.
The U.S. Fed left interest rates unchanged at the last meeting. The main increase in the key rate has already happened, but there is a signal for future tightening. The UK regulator is still fighting inflation. There are no clear signals for its stable decline for now.
According to the technical analysis, the GBP/USD currency pair is making an attempt to update the maximum. This is indicated by large candlestick patterns on the daily timeframe for the last 3 trading sessions.
The growth target will be to overcome the high of June 16 at 1.285. Stop-loss can be set at the update of today's low, which corresponds to the price of 1.273.
GBP/USD currency pair growth:
Take profit – 1.285
Stop-loss – 1.273