GBP/USD is nearing the 1.3200 level as the dollar once again came under pressure on Wednesday, despite better than expected PMI data out of the US.
The pair continues to carry a strong correlation with the equity markets with the S&P 500 trading at levels not seen since February.
The Bank of England announced its keeping interest rates unchanged and does not plan to raise them anytime soon. Policymakers unanimously agreed to continue forward with their bond purchase program, building towards their earlier target of 745 billion pounds in purchases.
The BoE expressed uncertainty regarding their economic outlook. They cautioned that their economic forecasts may not be as accurate as they normally would be. There are several variables when it comes to the Coronavirus that makes it more difficult to assess where the economy will go from here.
However, on balance, the BoE said that the economy has picked up and is headed in the right direction, based on looking at high-frequency indicators. Payments data has shown that spending has gone up, and reports last week indicated that the housing market has stabilized.
Inflation levels are expected to remain subdued, with a forecast of twelve-month CPI inflation hitting a quarter percent later this year.
GBP/USD is seen heading towards 1.3200 which is a possible first target. Beyond that, strong resistance is seen at 1.3262. This level has held the exchange rate lower, on a monthly chart, going back two years.
Immediate support the downside is seen near 1.3100 which marks the highest daily close from last week.
From a broader perspective, GBP/USD continues to show strong upward momentum and dips are likely to be bought. It might take a drop below the 1.3000 level to change the outlook for the pair.
The US Dollar is catching a bid from near last week’s lows which is something to be mindful of. While GBP/USD appears to be little impacted by the dollar bounce, some of the other major currencies are seen declining against the greenback in early trading on Thursday.
- GBP/USD is catching a strong bid following the Bank of England Meeting.
- Major resistance is seen at 1.3260 for the pair.
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