British Pound Forecast: GBP Trending Lower on UK Bank Holiday

[MongiIG]

POUND STERLING TALKING POINTS

• Pound degrades ahead of FOMC.
• How will the Fed impact the BoE?
• New lows on the cards for GBP/USD?

GBP/USD FUNDAMENTAL BACKDROP

The pound extended its losing streak against the USD on Monday while the UK observes the Queen’s state funeral. This may result in less than standard price volatility for GBP crosses during the European trading session. While there are no key economic data prints scheduled for today, the Bank of England (BoE) and Fed eral Reserve will be in focus this week as they announce their interest rate decisions (see economic calendar below).

GBP/USD ECONOMIC CALENDAR

Source: DailyFX Economic Calendar

The BoE is expected to by 60bps at this point leaving the door open for both 50bps and 75bps respectively. An ultra-aggressive Fed may prompt the BoE to go with the latter but should we see a 75bps interest rate hike (78% probability as of this writing), I expect the BoE to maintain a 50bps increment.

BOE INTEREST RATE PROBABILITIES

Source: Refinitiv

 

 

TECHNICAL ANALYSIS

GBP/USD DAILY CHART

Chart prepared by Warren Venketas, IG

 

Sep 19, 2022 | DailyFX
Warren Venketas, Analyst