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Consolidation Ahead of the Bank of England Meeting

8/3/2022 11:51 AM

The British pound is trading with multidirectional dynamics, consolidating near 1.2175. The day before, the instrument showed an active decline under the pressure of the US currency, which received significant support against the backdrop of worsening relations between the US and China. The day before, Speaker of the House of Representatives Nancy Pelosi arrived in Taiwan as part of her Asian tour. Her visit drew sharp condemnation from the Chinese authorities, who responded by announcing the start of large-scale military exercises around Taiwan, heightening tensions in the region.

Investors are waiting for the publication of the decision of the Bank of England on interest rates, the meeting on which will be held on August 4. Analysts' current forecasts suggest that the value will be raised by 50 basis points, which will be the most significant monetary tightening since 1997. However, even if the main market forecast comes true, it is unlikely to provide significant support to the pound, as the problems in the British economy are only getting worse. Today, market participants expect the publication of July data on the Services PMI and the Composite PMI from S&P Global/CIPS.

In the meantime, the election campaign for the post of Prime Minister continues in the UK. One of the candidates, former Finance Minister Rishi Sunak, said that if he is elected, the country will undergo a reform that implies the largest income tax cut in the last thirty years. In addition, Sunak intends to adjust value-added duties on electricity as early as this year, hoping to help households facing unprecedented increases in the cost of living amid soaring inflation of 9.4%. In turn, Liz Truss, the second candidate for the post of head of the British Parliament, said she did not intend to introduce new charges on foods and drinks high in fat, salt or sugar.

Bollinger Bands in D1 chart show moderate growth. The price range is narrowing, reflecting appearance of multi-directional dynamics in the ultra-short term. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic has reversed to a downward plane and is currently signaling in favor of the development of a corrective decline in the ultra-short term.

Resistance levels: 1.2236, 1.2328, 1.2400, 1.2457. | Support levels: 1.2133, 1.2074, 1.2000, 1.1933.

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