GBP/USD to Test 1.20 Support Amid Bearish Momentum, Central Bank Decisions
The GBP/USD is in focus ahead of this week’s key events: FOMC and BoE rate decisions. We also have UK CPI and retail sales, as well as global PMI figures to look forward to this week. The BoE could deliver a final 25 bps hike, while the FOMC is seen holding policy unchanged. I think the cable could be heading towards the low 1.20s.
Before discussing the FOMC and BoE, i.e., this week’s key macro events for GBP/USD, let’s have a quick look at the economic calendar relevant to the cable in order to be aware of the other important data releases that could influence the GBP/USD outlook:
UK economic pointers have deteriorated in recent months, owing to high inflation, and rising borrowing costs. But wages have continued to rise sharply, as workers demand higher pay. Inflation now needs to come down fast to arrest this price-wage spiral before it gets out of control. Last month, CPI did fall sharply from the 7.9% y/y recorded in June, albeit to a still-very-high 6.8% in July. CPI is expected to continue dropping rapidly in the next few months due to base effects. For August, however, it is seen rising back to 7.1% y/y from 6.8% in July. Core CPI is expected to print 6.8% compared to 6.9% the month before, while RPI is seen rising to 9.3% from 9.0% previously.
Wednesday, September 20
19:00 BST
Strong US inflation numbers and surprising strength in some other key parts of the world’s largest economy have given rise to speculation that the Fed’s tightening cycle may not be over just yet. While no policy changes are expected at this FOMC meeting, traders will be looking for clues with regard to the next meeting. If there’s a strong inclination towards a final hike before the year is out, then this should support the dollar on any
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