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Fundamental Forecast for the British Pound: Bullish
- British Pound Mixed after ‘In-Line’ 4Q GDP Reading
- Cycle turn window in GBP/USD
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The British Pound appears to be carving a higher low ahead of the Bank of England (BoE) February 6 meeting as the central bank is widely expected to normalize monetary policy ahead of schedule.
The Monetary Policy Committee (MPC) interest rate decision may reinforce the bullish sentiment surrounding the sterling as the central bank moves away from its easing cycle, but we may see a limited market reaction to the meeting should the BoE refrain from releasing a policy statement. In turn, the quarterly inflation report due out on February 12 may have a larger impact on the policy outlook, and the GBPUSD remains at risk of a larger correction over the near-term should the fundamental developments coming out of the U.K. dampen expectations of seeing a rate hike later this year.
Indeed, there’s growing bets that the MPC will implement a more dovish twist to its forward-guidance as the U.K. jobless rate quickly approaches the BoE’s 7% threshold for unemployment, but Governor Mark Carney may take a more aggressive approach in addressing the risk for an asset-bubble as the central bank head sees a further pickup in housing throughout 2014.
With that said, the technical outlook continues to favor the topside targets for the GBPUSD as it retains the bullish trend dating back to July, and the British Pound looks poised for a more meaningful at the 1.6700 handle as it puts in another higher low above the 1.6400 region. - DS
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