The U.S. dollar (USD) rose on Thursday as U.S. Federal Reserve (Fed) Chairman Jerome Powell admitted that further interest rate hikes are possible.
Yesterday, Powell confirmed the likelihood of two more Fed rate hikes. At the same time, he does not expect inflation to fall to the 2% target by 2025.
According to the CME FedWatch tool, investors now estimate an 81% chance that interest rates will rise by 25 basis points in July.
Today, market participants are awaiting the initial jobless claims data in the U.S. and the final GDP data for the first quarter. Gross product is expected to rise by 1.4%. Confirmation of the forecast may support the value of the U.S. currency.
The Bank of England is tightening its monetary policy. Last Thursday, the British regulator raised the rate by 50 basis points at once, up to 5% per year. The country's inflation remains high, so most analysts predict a 25 basis points hike at the next announcement.
Quantitative tightening has been increased for the thirteenth consecutive meeting, and the rate is now at its highest level since the financial crisis of 2008.
The Bank of England's decisive actions have convinced investors that it is likely to continue actively tightening its monetary policy until there is a noticeable slowdown in consumer price growth.
The U.S. and British monetary policies are similar in terms of dealing with high inflation. The news background this week mostly consists of events in the U.S. This supports the value of the USD.
The H4 timeframe shows the GBPUSD currency pair correcting within a downward channel.
In terms of wave analysis, the price is currently forming the second ascending wave on the M30 timeframe. Stochastic Oscillator moving indicators are approaching the overbought zone. This points to a possible completion of the formation of the second wave and reversal to the third wave.
Short-term prospects for GBPUSD suggest selling.
The target is at the level of 1,2505.
Part of the profit should be taken near the level of 1,2570.
A stop-loss could be placed near the level of 1,2750.
The bearish trend is short-term, so trade volume should not exceed 2% of your balance.