The GBP/USD pair is consolidating as traders await news from the Bank of England.
The US dollar may be on the verge of extending its gains.
The GBP/USD pair is trading flat at the start of the week, holding recent gains as it approaches a challenging area of resistance.
At the time of writing, cable is trading at 1.3822, down from 1.3836, and is holding at the session’s lows.
The EU approving a postponement to the chilled meat ban in Northern Ireland, which has helped to alleviate anxieties about trade tensions, is one of the benefits from a fundamental position.
With that stated, it may not take much to stir up political dust around this topic, causing markets to stay jittery and a new round of difficult EU-UK trade talks to loom on the horizon.
Meanwhile, the Bank of England is re-entering the market’s consciousness.
Governor Bailey of the Bank of England has recently sounded quite cautious.
The governor of the Old Lady has advised the bank not to overreact to what he sees as a transient increase in inflation, arguing that a quick rebound after the lockdowns are lifted is unlikely to last long.
Does this ring a bell? The Federal Reserve has adopted a similar stance, but markets aren’t convinced, which has fueled the greenback’s recent strength.
If there is a sustained period of solid US data in the next weeks, the greenback should gain support, as it may be on the cusp of a daily technical extension to the upside:
Meanwhile, the governor of the Bank of England, citing labor market problems, said, “Our current forecast is for the economy to return to the lower average underlying growth rates seen since the financial crisis. Returning to the pre-Covid pattern of reduced trend growth will present its own set of difficulties.”
The next policy meeting is on August 5, and no changes are expected, especially because Chief Economist Haldane, the lone hawk, will be stepping down before then.
Another lecture by Andrew Bailey will be the emphasis this week, as will updates on the UK’s coronavirus lockdown.
On the daily chart, bulls have taken on resistance, and given the breach of the April lows, there could be more from them in the 1.3870s.
If that doesn’t work, the price is likely to fall more./n
