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GBPUSD Market Update

11/25/2022 2:13 PM

The pound is consolidating near the level of 1.2100, actively adding in value after the publication of the November minutes of the last US Federal Reserve meeting on monetary policy, which caused a wave of sales of the American currency.

In the document, the regulator confirmed its readiness to slow down the pace of further interest rate hikes; however, officials still expect the "hawkish" course to continue until a qualitative improvement in the situation with consumer inflation, which is at peak levels. At the next meeting of the Fed, which is scheduled for December 14, the rate is expected to be adjusted by only 50 basis points, while in 2023 the pace could be reduced even more significantly. The second factor influencing the weakening of the dollar is the growing fears about the onset of a recession next year. Members of the Federal Open Market Committee (FOMC) estimate the probability of a downturn in the economy at 50%. It was also noted in the protocols that a further increase in interest rates could negatively affect macroeconomic indicators and the solvency of the population.

Also note the latest comments of the Deputy Governor of the Bank of England Dave Ramsden, who announced his support for the course to further increase in interest rates in the event that inflationary pressure in the country continues to increase. Speaking on Thursday at King's College London, he stressed that in the near future the economy is likely to develop in line with the latest forecasts and taking into account the balance of risks, which is expected to ensure a sustainable return of consumer prices to the 2.0% region, and in this case, a transition to a slower tightening of monetary incentives is possible. He also noted that, according to observations, a change in the level of interest rates has a maximum impact on inflation only after 18-24 months.

The combination of the factors described above contributes to the development of an uptrend in the GBP/USD pair. The day before, traders broke through the resistance level of 1.2050, and if the price can consolidate above it today, one can assume a further increase in quotations with the target of 1.2260. Breakout of the level of 1.2260 will allow the instrument to continue moving towards the area of 1.2655.

The medium-term trend is upward. As part of the growth, the price reached the target zone 5 (1.2111–1.2075), in case of breakdown of which the next buy target will be the range of 1.2471–1.2435. Key support for the trend is shifting to 1.1705–1.1660. When the price corrects in this area, it is worth considering new long positions with the first target at the high of the current week at 1.2150.

Resistance levels: 1.2260, 1.2655. | Support levels: 1.1770, 1.1695.

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