The GBP/USD exchange rate was flat on Wednesday as investors waited for the upcoming Fed and Bank of England (BoE) decisions. The pair remained at the important support level at 1.2700 as some experts predicted that a bullish breakout was around the corner.
Fed and BoE decisionsThe GBP/USD price will react to the outcome of the Federal Reserve decision scheduled for later on Wednesday. Broadly, this meeting will not bring any policy changes since most experts expect the Fed to leave interest rates unchanged between 5.25% and 5.50%.
Still, traders will focus on the Fed statement and the dot plot, especially after the recent strong economic numbers. For example, data published last week revealed that the American economy expanded by 3.3% in Q4, higher than the median estimate of 2.9%.
Retail sales have boomed while the manufacturing PMI figure has moved above 50. The labour market is still strong while consumer confidence has jumped to a multi–month high. Therefore, there is a likelihood that the Fed will deliver a hawkish pause, where it leaves interest rates unchanged and warns that they will remain higher for longer.
The other GBP/USD news will be the upcoming Bank of England decision, which comes two days after a report pointed to the harm made by the recent hikes. The report showed that the number of corporate bankruptcies surged to a multi-decade high in 2023.
Still, the bank will likely maintain a hawkish tone since inflation remains double its target of 2.0%. Analysts at Goldman Sachs, PGIM, and Vanguard have all turned bullish on the British pound, citing a more hawkish BoE. In a note, a Vanguard analyst said:
“While they were considered reluctant hikers previously and seen as dovish by the market, we believe that even when they cut, they might be reluctant cutters too.”
Looking ahead, the next key important GBP/USD news will be the upcoming US Non-Farm Payrolls (NFP) data scheduled for Friday. These numbers will likely show that the economy is still doing well even as interest rates remains at a two-decade high.
GBP/USD forecast
The bullish view of the GBP/USD pair makes sense from a technical perspective. As shown above, the pair has moved sideways this year and is hovering slightly above the 50-day moving average.
Interestingly, the pair has formed a symmetrical triangle pattern. Based on the previous rally, this triangle can be seen as being a bullish flag pattern. Therefore, there is a likelihood that the pair will have a bullish breakout in the coming days. If this happens, the next price to watch will be the psychological level of 1.300, which is 2.40% above the current level
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