GBP/USD retreats ahead of BoE policy announcement - Long Setup
Updated
Early on Thursday, GBP/USD retreated below 1.2600, losing its bullish momentum after reaching a one-year high at 1.2680 on Wednesday. The upcoming Bank of England (BoE) policy announcements are now in focus, with the pair's near-term technical outlook pointing to a bearish tilt.
The US Dollar (USD) came under selling pressure on Wednesday after the Consumer Price Index (CPI) data showed a rise of 4.9% YoY in April, below the market expectation of 5%. However, the cautious market sentiment did not allow GBP/USD to sustain its upward momentum.
The BoE is expected to increase its key rate by 25 basis points to 4.5% in the May policy meeting, though inflation remains stubbornly high. If two external members of the Monetary Policy Committee (MPC) vote in favor of keeping the policy rate unchanged, it could be seen as a hawkish surprise, while the GBP could gain strength if the policy statement shows some members voted for a 50 bps rate increase.
Revised projections will also be closely watched, and if the BoE expects inflation to fall rapidly before summer, it could signal the end of the tightening cycle, putting pressure on the GBP. If Governor Andrew Bailey leaves the door open for additional rate hikes, the GBP could regain its strength.
The technical analysis shows that the price has reached the 61.8% Fibonacci level at 1.2500 inside a bullish channel, providing a good opportunity for traders to take a long position. The upcoming BoE event is likely to be the primary driver of GBP/USD's action, though the April Producer Price Index (PPI) and weekly Initial Jobless Claims data will also feature on the US economic docket later in the day.
The US Dollar (USD) came under selling pressure on Wednesday after the Consumer Price Index (CPI) data showed a rise of 4.9% YoY in April, below the market expectation of 5%. However, the cautious market sentiment did not allow GBP/USD to sustain its upward momentum.
The BoE is expected to increase its key rate by 25 basis points to 4.5% in the May policy meeting, though inflation remains stubbornly high. If two external members of the Monetary Policy Committee (MPC) vote in favor of keeping the policy rate unchanged, it could be seen as a hawkish surprise, while the GBP could gain strength if the policy statement shows some members voted for a 50 bps rate increase.
Revised projections will also be closely watched, and if the BoE expects inflation to fall rapidly before summer, it could signal the end of the tightening cycle, putting pressure on the GBP. If Governor Andrew Bailey leaves the door open for additional rate hikes, the GBP could regain its strength.
The technical analysis shows that the price has reached the 61.8% Fibonacci level at 1.2500 inside a bullish channel, providing a good opportunity for traders to take a long position. The upcoming BoE event is likely to be the primary driver of GBP/USD's action, though the April Producer Price Index (PPI) and weekly Initial Jobless Claims data will also feature on the US economic docket later in the day.
Trade active
Price Rebound on the Support Area and come back in Green Zone. 
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