GBP/USD recovering on central bank divergence – can it last?

Ian McCafferty is a consistent hawk in the Bank of England’s Monetary Policy Committee. While his colleagues are deliberating the options of raising rates[1] against rising inflation yet a slowing economy, McCafferty has other ideas.

In an interview with The Times, he suggested reviewing the Bank’s policy of Quantitative Easing. He suggests bringing an early end to the bond-buying scheme. This is a hawkish shift.

Also the Federal Reserve is on a path to begin unwinding its QE program, probably in September, beginning the reduction of its balance sheet. However, Fed Chair Janet Yellen expressed some concerns over inflation[2], opening the door for a delay regarding the next rate hike.

Yellen will testify again today, but she is unlikely to provide any new headlines.

Elliott Wave Analysis: GBPUSD Trading in A Bigger Ending Diagonal[3]

GBP/USD rises, but there are many doubts

On this background, GBP/USD is on the rise. GBP/UDS trades above 1.29 once again, reaching 1.2924. Resistance awaits at 1.30, followed by 1.3050. Support is at 1.2820 and then at 1.2775.

Sterling got a boost from the not-too-bad jobs report yesterday, but there are still reasons to worry. Wages are rising at a slower pace than inflation and consumers remain hesitant.

The RICS House Price Balance came out at 7% against 15% expected. The BCC’s survey showed weakness. We will later get the Bank of England’s Credit Conditions survey.

Here is the chart:

Get the 5 most predictable currency pairs[4]

from Forex Crunch

from Online Forex Trading Resource
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