Jakarta, GIC Trade – The pound sterling in Monday's trading, moving in a relatively limited range, as market participants were reluctant to take new positions ahead of the central bank's monetary policy decision this week.
 
Even the pound sterling currency tends to be depressed against the US dollar amid the lack of data, failing to provide a meaningful boost for the GBP/USD pair.
 
This week, the United States (US) central bank or Federal Reserve (The Fed) is scheduled to announce its policy decision on Thursday. The policy will be followed by the Bank of England (BOE).
 
Meanwhile, speculation that rising consumer inflation will force the BOE to continue raising its benchmark interest rate provides some support for the pound. The BOE is expected to raise interest rates by 50 basis points (bps) to 4.00% from 3.50% at the previous meeting. This is because the BOE is worried about double-digit inflation.
 
On the other hand, the Fed will actually slow down its benchmark interest rate for an increase of only 25 bps and is in the range of 4.75-5.00%. Where the projected inflation has decreased has supported the expectation of a smaller interest rate policy announcement.
 
Market participants seem confident that the US central bank will soften its hawkish stance amid signs of easing inflationary pressures. Those expectations were reaffirmed by the release of the Fed's preferred inflation gauge on Friday, with the Core PCE price index from the US, which fell to a level of 4.4% YoY in December from 4.7% previously. However, other recently released US macro data supports the case that the Fed is to maintain its hawkish stance longer.
 
Therefore, investors will be looking for cues about the Fed's future rate hikes, which will play a key role in influencing the US dollar price dynamics and giving a new directional boost to the GBP/USD pair.
 
Fundamentally, the BOE, which is more aggressive on raising the benchmark interest rate than the Fed, which actually slows down interest rate hikes, has the potential to strengthen the pound sterling currency. Then how technically, see the following analysis:
 
Technical Analysis




The GBP/USD Forex pair on the 1-Hour period tends to move sideways or flat, as seen from the narrowing Bollinger Band (BB) indicator. To determine the direction of the next trend, it is necessary to break the wrong level or resistance and support levels.
 
If GBP/USD is able to break through the 1.24175 area then the bullish bias will continue until the resistance of 1.25130. However, if the pound manages to break the level of 1.23580, then the bearish bias will continue until the next support at 1.22930.
 
As long as the chart is above the MA200 line, then the GBP/USD movement tends to go up.
 
This analysis is a fundamental and technical view used by the author, not a suggestion or invitation. To get more information click on the image below.