The GBPUSD pair is up slightly at 06:00 (GMT) as investors react to the Bank of England (BOE) interest rate decision. The pair is trading at 1.3173, which is its highest level since March this year.
In its rates decision, the BOE did what most analysts were expecting. It left the main lending rate unchanged at 0.10% and to maintain the target for quantitative easing at £745 billion. As you recall, the bank added £200 billion to this ceiling in the June meeting.
In the statement, the BOE said that it expects the GDP to have contracted by 20% in the second quarter. But, the bank – using high frequency data – said that it expects the economy to make a modest recovery in the third quarter. It expects the unemployment rate to jump to about 7.5% by the end of the year while inflation will remain below the 2% target in the near term. Also, the bank stands ready to tweak monetary policy if conditions worsen.
The BOE interest rate decision came a day after analysts at JP Morgan predicted that the bank would slash interest rates to zero in the near term. Also, it came a few hours after a survey of Economists by Reuters found that most of them were expecting the GBPUSD pair to drop by the end of the year.
GBPUSD technical forecast
The daily chart below shows that the GBPUSD pair has been in an upward trend since March, when it dropped to 1.1422. The price remains above the 50-day and 100-day exponential moving averages. Also, it has just moved above the 78.6% Fibonacci retracement level. Most importantly, bulls are attempting to move above the important resistance (March 09 high) of 1.31900. Therefore, the pair is likely to continue rising, at least in the near term, as bulls target the YTD high of 1.3512.
On the flip side, a move below 1.2988, will mean that there are still sellers in the market who will be keen to push it lower to possibly the 61.8% retracement at 1.2700.