Pound Sterling supported above 1.25 after Gross Domestic Product confirms UK avoids a recession GBPUSD Technical Analysis Fundamental Analysis
The pair fell on Thursday after the Bank of England published its decision, and deepened its decline followingChairman Andrew Bailey’s dovish opening comments. Although it recovered later in the press conference as Bailey moderated his tone, GBP/USD ended the day just above 1.2500, as a further factor – renewed banking crisis woes – took its toll.
GBP/USD initially fell following the BoE’s announcement of its decision by a vote of 7-2 to raise interest rates by 0.25% bringing the Bank Rate to 4.50%. Headline inflation in the UK is at 10.1% which is more than double the 4.9% reading in the US. US and UK Core inflation are more similar, however, with US at 6.2% versus 5.5% in the UK. Nevertheless it suggests the UK will have to continue raising rates after the Federal Reserve has stopped. This should benefit GBP over USD as global investors favor currencies with higher interest rates to park their money.
The main release for the US Dollar on Friday is Michigan Consumer Sentiment Index which is forecast to fall to 63.0 in May for its preliminary reading. GBP/USD sells off to 1.2500 and shows signs it may extend lower, however, this does not change the broadly bullish long-term picture. The uptrend remains intact as long as the 1.2435 May lows hold, and thus still favors Pound Sterling longs over shorts, for now.
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