For the third consecutive day, the price of the pound sterling against the US dollar GBP/USD is trying to bounce back, currently standing at 1.2732. This comes after a recent period of strong selling that pushed it down to 1.2656, its lowest point in a month.
Today, Wednesday, the pound sterling saw a slight increase following the news that inflation in Britain fell to the Central Bank’s target of 2% in May, as expected. Core inflation also dropped to 3.5% from 3.9%, and service inflation fell to 5.7% from 5.9%. Despite this, the Bank of England stated that hitting the inflation target alone will not lead to an interest rate cut. The Bank is expected to maintain its key interest rate at 5.25%, but many economists predict two rate cuts later this year, with the first potentially in August.
In terms of politics, recent polls indicate that the Labor Party is ahead in the upcoming July 4 election, while the Conservatives led by Prime Minister Rishi Sunak are in second place.
Forex trading platforms suggest that GBP/USD could rise if Dave Ramsden votes against a rate cut on Thursday, reducing the likelihood of a cut in August. The Bank of England is expected to keep rates unchanged on Thursday, signaling that any rate cut decisions will depend on future data. A 7-2 vote to hold rates steady is anticipated, which would have a neutral impact on the pound.
Any changes in the voting structure could hint at future rate cut decisions. If the odds of a rate cut in August decrease, the pound is likely to strengthen. A 6-3 vote for a rate cut is unlikely, as it would be unusual for another MPC member to support it. However, an 8-1 vote to keep rates on hold, with Dave Ramsden changing his vote, is more probable given the recent inflation data.
On a technical note, the GBP/USD pair is showing bullish signs on the daily chart, with the price above the resistance level of 1.2775. A move towards the psychological resistance level of 1.3000 is possible if the trend remains strong. The support level of 1.2600 will be crucial if the downtrend continues.
Given the American holiday, we anticipate the GBP/USD price to trade within narrow ranges today.