GBPUSD is moving in a range due to the similarity of monetary policies of the Fed and the Bank of England

06 February 2024 90
GBPUSD is moving in a range due to the similarity of monetary policies of the Fed and the Bank of England

On Tuesday, there was a slight increase in the GBPUSD currency pair’ price after a strong decline the previous day.

 

At the beginning of the week, the dollar reached a 3-month high, having strengthened amid the growth of US Treasury bond yields. This increase was due to a small probability of a rapid interest rate cut by the Federal Reserve in 2024.

 

According to published data, the US services sector growth picked up in January as new orders increased and employment rebounded. A number of strong economic indicators dispelled the market's hopes for a rapid and sharp reduction in interest rates by the regulator. Fed Chairman Jerome Powell and other officials also spoke out against the central bank's rapid easing of monetary policy.

 

As the CME FedWatch tool shows, traders are currently pricing in only a 15% chance of a rate cut in March, compared with a 69% chance at the start of the year.

 

Meanwhile, the Bank of England is also sticking to a tight monetary policy. Huw Pill, the English regulator's chief economist, said on Monday that the question for most of the central bank’s policymakers is not whether to cut interest rates, but when it would be appropriate to start doing so. Pill was among six members of the bank's Monetary Policy Committee who voted last week to keep interest rates at 5.25%. Bank of England Governor Andrew Bailey said after the decision that inflation was "moving in the right direction" and the central bank may reconsider its plan to raise rates.

 

The similarity of the US and UK monetary policies keeps the GBPUSD currency pair in a rectangular range.

 

The GBPUSD pair approached the support of the corrective channel on the H4 timeframe. The curve of the RSI (standard values) is in the oversold zone. After the pullback, the pair price could resume growth within the corrective channel.

 

Signal:

The short-term outlook for the GBPUSD pair is to buy.

The target is at the level of 1.2770.

Part of the profit should be fixed near the level of 1.2655.

A Stop-loss could be placed near the level of 1.2430.

 

The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.

 

This content is for informational purposes only and is not intended to be investing advice.

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