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Interest Rate Hike did not Support the Position of the British Pound

12/19/2022 3:08 PM

The GBP/USD pair is testing the level of 1.2180 for a breakout, trying to recover from an active decline at the end of last week, when quotes renewed local lows from December 7.

On Thursday, the Bank of England raised interest rates by 50.0 basis points for the ninth consecutive time to 3.50%, but officials say that a recession in the fourth quarter is almost inevitable, as the peak of inflation has not yet passed, and macroeconomic indicators show negative dynamics, led to a decrease in the asset. However, agency officials are set to continue tightening monetary policy at a current or slower pace as pressure from high consumer prices on households and businesses continues to abate, and most real estate market indicators continue to deteriorate.

Macroeconomic statistics also did not support the position of the pound: the volume of retail sales in November reached –5.9% YoY, which was lower than the forecast of –5.6%, the core figure fell to –5.9%, which is worse than analysts' expectations of –5.8%, while Manufacturing PMI in December corrected from 46.5 points to 44.7 points, while the forecast was for a decline to 46.3 points. Positive dynamics were noted only in Service PMI, which amounted to 50.0 points, exceeding the experts' expectations of 49.2 points and the previous value of 48.8 points, but this was not enough to support the GBP/USD pair.

Also, the weakening of the trading instrument was facilitated by the decision of the US Federal Reserve to adjust the interest rate by 50.0 basis points to 4.50% after a fourfold increase of 75.0 basis points. At the same time, the head of the regulator, Jerome Powell, noted that the indicator would remain high longer than originally estimated, resulting in the US dollar strengthening against all currencies.

The long-term trend is upwards. After reaching the resistance level of 1.2400, the trading instrument went into correction with the target at 1.1900, and if it is held, the growth may continue to 1.2655.

The medium-term trend is upwards. Last week, market participants reached the target zone 6 (1.2471–1.2435), which was held, and the price started a correction to the 1.1998–1.1953 zone, after reaching which new purchases can be considered with the target at last week's high in the 1.2435 area.

Resistance levels: 1.2400, 1.2655. | Support levels: 1.1900, 1.1640.

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