The pound is ready to slightly rise

The GBPUSD currency pair, as it was mentioned in the previous forecast, continued recovering and successfully reached the level of 1.272. But it might not be the limit for the pound. The main target is still the return to the June highs near 1.285, and in the short term the bulls may pay attention to the level of 1.275. The current news background plays in favor of GBPUSD growth.

This week the financial markets are seeing business activity indices. PMI data from almost all major economies around the world showed a deterioration in sentiment among corporate executives. However, the British PMIs did not succumb to the general pessimism and either were unchanged (in case of the service sector) or even showed a slight improvement (in case of the manufacturing sector).

Such economic statistics combined with very high inflation makes it almost inevitable that the Bank of England will raise interest rates again in its August 3 meeting. During his last speech, British Prime Minister Rishi Sunak promised to make full use of monetary and fiscal policy to suppress persistent inflation.

However, this will not be easy, because the higher rate of price increases is fundamentally based on labor shortages and accompanying wage increases. A significant number of people decided to retire early during the pandemic, and a full replacement for this lost workforce has yet to be found.

Meanwhile, UK population rose inflationary expectations. A monthly survey by Citi Bank and polling firm YouGov showed that consumer inflation expectations for the year ahead rose to 5.0% in June from 4.7% in May. By now market participants expect the Bank of England to raise rates to 6.25% from the current level of 5%.

The nearest growth target for the GBPUSD is at 1.275. The Stochastic indicator is still far from a downward reversal and still confirms a buy signal.

The following trading strategy can be suggested:

Buy GBPUSD at the current price. Take profit — 1.275. Stop loss — 1.268.

Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.