Price Analysis

GBP/USD Looks to Establish New Trade Range

Pounds on the High

After the Bank of England’s policy meeting on Thursday and the subsequent announcement of an increase in interest rates by just 25 bps, the pounds maintained its high selling point, with investors buying into it steadily. The bank further informed the public that among the nine MPC voting members, four voted to have the interest rate increased by 50 bps. 

An update on the outlook of the inflation, when the pressure on market prices have gone up over 7% before the subsidies in spring, has kept the call for hawkish solutions vibrant and underscored market expectancies of around 120 bps in rate increase before the end of the year as base rates are predicted to reach 1% in May.

 As the economic policies of the UK and the circumstances carrying it gets more vivid with each passing day, it is not the same in the political arena where it is unknown how long Prime Minister Boris Johnson will stay in office. Four top officials of the Prime Minister’s office resigned from their positions on Thursday, claiming they had different, irreconcilable differences with the Prime Minister. It was reported that three of them were involved in some party-related scandals, so they may have decided on an exit before being forced out. 

GBP/USD price chart. Source – TradingView

Political Temperature

The exit of three senior staff members is, however, not a good omen for a Prime Minister under heavy pressure resulting from the party scandal and also his own comments about the Opposition Leader in Parliament. Likewise, the increasing number of Members of Parliament passing a vote-of-no-confidence in the Prime Minister makes the political economy unclear.

The pound may look at any change in the political space after a time of volatility and the Bank of England’s readiness to address inflation, the possible way to push the pound forward. The GBP/USD pair is a little off the many days’ height achieved on Thursday, and it may find ways to create a range over the dollar. 

The American dollar also dropped part of its latest gains as central banks in various countries are coming up with monetary policies of theirs. The European Central Bank mentioned yesterday that it is likely to end its APP program sooner than expected to make way for interest rate increases at later times this year.

The initial resistance level for the GBP/USD pair is 1.3749, but it may require some time to convincingly break.   

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