GBP/USD Aims to Retake 1.40 Ahead of BoE Rate Decision

2 min read
22 Jun, 21
Written by Clover4X
Article Highlights:
  • The sterling accelerates against the dollar, pushes near the 1.40 milestone
  • Bank of England rate decision on the traders’ agenda for Thursday

GBP/USD Aims to Retake 1.40 Ahead of BoE Rate Decision

The British pound successfully pared Friday’s losses against the dollar on Monday as GBP/USD bulls charged toward the 1.40 threshold. The GBP/USD rate finished Monday’s trading up 1.1%, or 150 points, to 1.3937. In contrast, Friday’s trading pushed the pair lower by 152 points to a low of 1.3792.

Monday was the first green close for the pair for the last seven trading days. Before the positive session, the GBP/USD depreciated 2.75% in six consecutive losing sessions, sliding to a two-month low of 1.3790. On Friday, the pair dipped below the 100-day moving average, only a day after it went under the 50-day moving average.

The US dollar is seen to depreciate against the pound as the corrective move in the greenback is taking place across the currency board. The hawkish tone of the US Federal Reserve on Wednesday lifted the dollar in a surprisingly sharp jump. Traders and investors interpreted the Fed decision to raise interest rate sooner than planned as a bullish signal for the dollar and piled in.

A Hint of Optimism for the Economy?

Now that the immediate volatility prompted by the Fed announcement has faded, the GBP/USD is currently trading near the 1.3900 area. The decline in the volatile swings in the GBP/USD pair is also attributed to the anticipated Bank of England event that would be closely monitored by currency traders. On Thursday, the Bank of England is set to announce its latest interest rate decision.

Even though policy changes are unlikely as the BoE Governor Andrew Bailey is expected to keep the interest rate near zero, a more optimistic reading of the economic outlook could create increased demand for British pounds. On the other hand, UK inflation is at a two-year high and by keeping the interest rate at ultra-low levels, the economy risks running hotter, threatening to derail the recovery.

Some Bank of England officials have called for a rate hike in 2022, even before the Federal Reserve tweaks its rate of interest. A speech by committee member Gertjan Vlieghe sparked the rate hike debate earlier this month. Although he is set to leave his post shortly, he suggested the UK central bank acted before its US counterpart.

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