GBP/USD – 1.52 Inflection Point

GBP/USD – 1.52 Inflection Point

GBP/USD – 1.52 Inflection Point

The British pound is in play tomorrow with the Bank of England scheduled to make a monetary policy announcement. While no changes are expected, the minutes are now released alongside the statement and its tone could trigger a big reaction. Last month, sterling fell sharply on the back of surprisingly dovish comments. This month, while the decline in oil prices gives policymakers more to worry about, sterling has also fallen in value versus the euro since the last meeting, which helps to offset some of the pressure on inflation. As shown in the table below, the economy has seen just as much improvement as deterioration since the last meeting but as we have learned in the latter part of this year, inflation is a far bigger concern for the BoE than growth.

Technically GBP/USD is at an important inflection point. If the currency pair rises above 1.52, the downtrend would broken as 1.52 was previously an important support level. This gives scope for a stronger rally to 1.5350. However if it fails at 1.52, then another run to 1.50 is likely.

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