The Great British Pound strengthened against the dollar yesterday. Sterling hit a more than one-year peak yesterday. Currency traded as high as $1.2668, its highest since April 2022 against the dollar and hit 103.5544 against the Rupee.
The US Dollar index remained indecisive as negotiations for a debt ceiling raise are expected to be heated. As Republicans are expected not to approve the deal unless big cuts in President’s spending initiatives are promised by US President Joe Biden. Which also supported the recent gain in Pound.
Now the Pound will act strongly on the Bank of England Policy meet, scheduled on Thursday. The Bank of England (BoE) is expected to continue its policy-tightening regime further. As labor shortages and higher food inflation are keeping the United Kingdom’s inflation steadily in double-digit territory.
The 12th consecutive interest rate hike by BoE Governor Andrew Bailey, which is expected by 25 basis points (bps). Will push interest rates to 4.50%. As the Fed is expected to hit a pause ahead, an interest rate hike by the BoE will trim the Fed-BoE policy divergence
Inflation in the U.K. is running at 10.1%, markedly higher than in the Euro zone, exacerbated by soaring food costs. And shortages in the labor market linked to Brexit, keeping wages high.
The combination of high inflation and a tight labor market are fueling bets for further rate hikes this year so the central bank’s updated projections for growth and inflation will be closely watched.
GDP numbers – Friday
The U.K. is to release data on first quarter GDP which is expected to indicate that growth remained weak in the first three months of the year. Data is foreseen at 0.0% as compared to previous month 0.0%.
Technical Outlook
Since 8 March 2023, GBPINR has turned positive. Since then the pair gained more than 4%. Yesterday, it closed at 103.1846, after making a high of 103.5544.
Recently, GBPINR pair has broken the short term consolidation zone. And also, traded above its 23.6% Fibonacci Retracement level. Both of which are indicating a bullish outlook in the near future.
On the upside, immediate resistance is seen at 103.5560 a break above the pair will test 103.8885-104.4550 very soon.
Alternatively, on the downside crucial support is seen at 103.10. A break below only the pair will show some weakness. It may retreat towards 102.55-101.90.