The GBPUSD currency pair, having renewed the yearly highs in mid-July, started to move downward. At yesterday's trading session, the quotes did not reach the main correction target of 1.28. Nevertheless, taking into account the crucial events of the current week, traders will still have chances to reach this level. The main attention of the currency market participants is focused on the meetings of the Fed and the Bank of England.
Investors do not expect any active steps from tomorrow's US regulator meeting. The key rate will remain at the current level of 5.25–5.5% until September, when the first reduction is expected with a probability of almost 90%. However, the Bank of England's monetary policy decision on August 1 may be surprising, especially since traders have not reached a consensus on the outcome of this event.
Economists and analysts lean toward the key rate cut by the British regulator from 5.25% to 5%, while the opinions of currency market participants were divided almost 50/50. According to representatives of Bloomberg, such a scenario carries a serious risk of the national currency weakening. At the moment, only the pound of all G10 currencies has been showing growth against the dollar since the beginning of 2024. But if the Bank of England starts the cycle of monetary policy easing before the Fed, all the pound's gains may be lost, as it happened with the euro.
The latest economic data speaks in favor of lower borrowing costs in the UK. Price growth in UK stores slowed to just 0.2% in July, the lowest level since October 2021. The British Retail Consortium attributes the cessation of price growth to weak customer demand with the corresponding index dropping from -24 to -43 points. Such negative trade dynamics clearly requires lower interest rates to support the national economy.
Given the various Fed and Bank of England measures, GBPUSD quotes are likely to continue the pullback. The nearest target for the bears remains the level of 1.28.
The following trading strategy can be suggested:
Sell GBPUSD at the current price. Take profit — 1.28. Stop loss — 1.291.
Traders can also 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.
