- Policymakers in the UK feel the BOE should approach rate hikes more aggressively.
- Inflation in the UK could hit 11% in October.
- The RSI shows weakness in the bears in the 4-hour chart.
The GBP/USD forecast is positive as the pair pushed higher on Tuesday after policymakers in England started drumming up support for higher rate hikes. Catherine Mann, a member of the MPC yesterday, said the BOE was lagging in rate hikes and needed to raise rates faster to strengthen the Sterling, whose weakness was adding to inflation in the country.
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“In my view, a more robust policy move … reduces the risk that domestic inflation already embedded is further boosted by inflation imported via a sterling depreciation,” Mann said.
Inflation in the UK is expected to hit 11% in October, which would pose an enormous challenge for the Bank of England. Such high inflation could become persistent.
GBP/USD key events today
Later in the day, the Confederation of British Industry will release the industrial trends orders data, which measures the economic expectations of manufacturing executives in the UK. It shows the current business conditions in the country. Investors expect the orders to drop to 22 from 26.
Investors will be looking for future monetary policy clues in Silvana Tenreyro’s speech later in the day as she is a member of the Monetary Policy Committee (MPC) of the Bank of England.
Finally, there will be existing home sales data from the US, which investors expect to show a contraction in the housing market.
GBP/USD technical forecast: Bullish RSI divergence
Looking at the 4-hour chart, we see the price is pushing higher and is heading for the 30-SMA at 1.2400. This move comes after the RSI showed a bullish divergence that could mean a return of bullish momentum. This momentum could lead to a break above the SMA and 1.2400.
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Currently, the price is still trading below the SMA, and the RSI is below 50, favoring the bears. The bullish divergence in RSI will only play out if we can see the price breaking above the 30-SMA and RSI pushing above 50. If this happens, the price could be pushed to 1.2600 and beyond. However, if the SMA holds, we could see the price retesting 1.1950.
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