Breakout Trap or Trend Reversal? What the Market is Telling Us
The Bank of England looks set to cut interest rates on Thursday for only the third time since 2020. During its December meeting, the BoE’s Monetary Policy Committee voted 6-3 to maintain the current rates. Currently, the BoE’s benchmark bank rate stands at 4.75%, the highest among major developed economies. A widely expected cut of 25bps would bring it closer to the U.S Federal Reserve’s 4.25-4.5% range. Moreover, the market has largely priced in the possibility of a 25bps rate cut.
However, the BoE remains cautious about inflationary pressures. The rate-cutting cycle is entering a more challenging stage, as a rebound in energy prices and a significant rise in labor costs could push inflation to 3.5% by April. In December, inflation was recorded at 2.5%, exceeding the BoE’s 2% target.
From a technical analysis perspective, the recent price action for
GBPUSD has broken through the descending channel, forming a bullish trend as indicated by the formation of higher lows and higher highs. However, the price is currently testing the rectangular resistance zone. If the price manages to break through this resistance, it is highly likely to gain bullish momentum, driving the price higher. Conversely, if this resistance zone successfully blocks the price from moving higher, the bearish momentum may regain control, driving the price downward.
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74.2% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not necessarily indicative of future results. The value of investments may fall as well as rise and the investor may not get back the amount initially invested. This content is not intended for nor applicable to residents of the UK. Cryptocurrency CFDs and spread bets are restricted in the UK for all retail clients.
However, the BoE remains cautious about inflationary pressures. The rate-cutting cycle is entering a more challenging stage, as a rebound in energy prices and a significant rise in labor costs could push inflation to 3.5% by April. In December, inflation was recorded at 2.5%, exceeding the BoE’s 2% target.
From a technical analysis perspective, the recent price action for
GBPUSD has broken through the descending channel, forming a bullish trend as indicated by the formation of higher lows and higher highs. However, the price is currently testing the rectangular resistance zone. If the price manages to break through this resistance, it is highly likely to gain bullish momentum, driving the price higher. Conversely, if this resistance zone successfully blocks the price from moving higher, the bearish momentum may regain control, driving the price downward.RISK DISCLAIMER
74.2% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not necessarily indicative of future results. The value of investments may fall as well as rise and the investor may not get back the amount initially invested. This content is not intended for nor applicable to residents of the UK. Cryptocurrency CFDs and spread bets are restricted in the UK for all retail clients.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.