The GBPUSD currency pair spent last week in correction from 3-month highs set just above the level of 1.27. The pullback allowed to eliminate the overbought condition on the technical indicators, while the main achievements of the past growth wave were preserved. After taking a breath, the pound buyers will return to the currency market, and GBPUSD quotes may rise back to the level of 1.27.
This week, a number of financial regulators, including the Federal Reserve and the Bank of England, will meet. Traders do not expect any changes in interest rate levels, all eyes are now on the forecasts for 2024. The market participants try to understand which of the world's leading central banks will be the first to start the monetary policy easing cycle. The Bank of England is in the last place in almost all surveys and ratings.
According to Bloomberg, traders took a net long position on the pound for the first time since the beginning of September. Against this background, analysts at Goldman Sachs have raised the forecast for the rate of the British currency in the pair with the dollar. Instead of 1.2 is now expected to reach the level of 1.3 in the next 6 months. According to the updated forecast of Goldman Sachs, the Fed and the European Central Bank (ECB) will cut interest rates in the first half of 2024, while the Bank of England will cut interest rates only in August.
Jane Foley, head of FX strategy at Rabobank, notes that inflation in the UK is still too high. Because of this, the Bank of England will not be able to conduct a large-scale easing of monetary policy before the second half of next year. Analysts at Fidelity International have a similar viewpoint and give the most optimistic forecast for 2024 for GBPUSD at 1.4.
As long as GBPUSD quotes hold above the level of 1.25, a new wave of growth remains the priority scenario. It may start today if the US inflation data for November is better than expected. The short-term target for the bulls will be a return to the level of 1.27.
The following trading strategy may be offered:
Buy GBPUSD at the current price. Take profit — 1.27. Stop-loss — 1.25.
Also, traders can use a Trailing Stop instead of a fixed Stop-loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
