- The Fed is expected to raise interest rates by 75bps on Wednesday.
- The BoE is expected to deliver a 50 or 75bps rate hike.
- Britain’s challenges stem from opposing monetary and fiscal policies.
Today’s GBP/USD outlook is bearish. However, this might change as the pair will likely consolidate with Britain observing a public holiday. This consolidation might go into tomorrow’s trading session as investors will be cautious ahead of the FOMC meeting on Wednesday and BoE’s rate decision on Thursday.
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Stronger-than-expected inflation numbers have increased expectations for how active policymakers need to be to control consumer prices, making Wednesday’s Fed meeting even more important. The Fed is expected to raise rates by 75bps, but some are ready for a full percentage point increase, which was unthinkable only a few days ago.
Investors will pay attention to Fed Chair Jerome Powell’s views on the pace of monetary tightening, the resilience of the US economy, and inflation.
To combat inflation, the BoE plans to increase interest rates on Thursday by 50 or 75 basis points. Britain’s new finance minister, Kwasi Kwarteng, is expected to submit his first fiscal statement on Friday to fulfill Liz Truss’ promise to undo the increase in social security contributions that took effect in April and the upcoming increase in corporate tax.
Opposing monetary and fiscal policy directions highlight the challenges for Britain, which has the highest inflation rate among the world’s top developed economies and faces a recession.
GBP/USD key events today
The United States will not release important news today while the UK is observing a public holiday.
GBP/USD technical outlook: Downtrend continues below 1.1425
The 4-hour chart shows the price trading below the 30-SMA and the RSI below 50. This market belongs to sellers, and they look ready to push the price lower. The downtrend began when the price broke below and retested the 30-SMA and 1.1584 key level. Since then, the price has decreased, breaking below the next support level at 1.1425. It paused at 1.1360, which might become a solid support level.
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The price is currently retesting the 1.1425 level as resistance and is showing signs it might push off this level and collapse further. The downtrend will continue if the price breaks below 1.1360 and stays below the 30-SMA.
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