GBP/USD – Pound Gains Ground as BoE Hints at Rate Increase

The British pound has posted gains in the Thursday session, erasing the losses seen on Wednesday. In North American trade, GBP/USD is trading at 1.3919, up 0.29% on the day. On the release front, the Bank of England maintained interest rates at 0.50%, but hinted at earlier and larger rate hikes. In the US, unemployment claims dropped to a sparkling 221 thousand, well below the estimate of 232 thousand.

The BoE was in the spotlight on Thursday. The Bank made no changes to interest rates or quantitative easing, and both moves were unanimous (9-0). There was some surprise however, at the hawkish tone of policymakers, who said that interest rates could rise “earlier” and by a “somewhat greater extent” than they predicted at their previous meeting in November. Bottom line? We could see an interest rate in the first half of 2018, with analysts circling May as the most likely date. At the same time, the effect that Brexit is having on the economy is difficult to predict, and if the economic conditions worsen, the BoE could delay a rate hike.

Pound jumps on ‘Hawkish’ BoE

It’s been a rough week for the pound, which is down 1.5 percent. The US dollar has posted gains against the pound and the other majors, after a massive sell-off on global stock markets on Monday. The sell-off was precipitated by strong US nonfarm payrolls and wage growth reports on Friday. This triggered concerns that higher inflation was on the way, which in turn would result in more rate hikes this year. Higher interest rates make the dollar more attractive for investors, at the expense of other currencies. If the turbulence in the stock markets continue, the pound could resume its downward movement.

GBP/USD Fundamentals

Thursday (February 8)

  • 7:00 BoE Inflation Report
  • 7:00 MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9
  • 7:00 BoE Monetary Policy Summary
  • 7:00 BoE Official Bank Rate. Estimate 0.50%. Actual 0.50%
  • 7:00 BoE Inflation Letter
  • 7:00 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9
  • 7:00 British Asset Purchase Facility. Estimate 435B. Actual 435B
  • 8:30 US Unemployment Claims. Estimate 232K. Actual 221K
  • 10:00 US Mortgage Delinquencies. Actual 5.17%
  • 10:30 US Natural Gas Storage. Estimate -116B. Actual -119B
  • 13:01 US 30-year Bond Auction

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, February 8, 2018

GBP/USD February 8 at 12:20 EDT

Open: 1.3880 High: 1.4067 Low: 1.3846 Close: 1.3918

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3744 1.3809 1.3901 1.4010 1.4128 1.4271

GBP/USD ticked upwards in the Asian session. In European trade, the pair posted slight losses but reversed directions and made strong gains in European trade. In the North American session, the pair posted slight gains but has changed directions and is moving lower.

  • 1.3901 is providing support
  • 1.4010 was tested in resistance earlier on Thursday

Current range: 1.3901 to 1.4010

Further levels in both directions:

  • Below: 1.3901, 1.3809, 1.3744, 1.3613
  • Above: 1.4010, 1.4128 and 1.4271

OANDA’s Open Positions Ratio

GBP/USD ratio is showing movement towards short positions. Currently, short positions have a majority (55%), indicative of trader bias towards GBP/USD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.