GBP/USD hit highs last seen in April 2022 on Wednesday as the US Federal Reserve confirmed a June interest rate freeze.
The GBP/USD is trading near the 1.26450 level at the time of writing with a rapid boom. Traders should compare the value of GBP/USD while reading this article with the actual market to gain perspective on price dynamics in the currency pair. Last night, after the US Federal Reserve said it would not raise its federal funds rate, GBP/USD rose as a result to near 1.26990. This higher value was last recorded in April 2022.
Traders should have expected a slight sell-off in GBP/USD this morning as inactivity from the US central bank was highly anticipated. The confirmation of the outlook from the financial institutions certainly caused the 1.27000 level to take center stage briefly yesterday as the bullish trend in GBP/USD increased to the upside, but much of the buying power was already in GBP/USD. The currency pair traded near the 1.23060 ratio on the 25thThursday May.
Yesterday’s intraday low near 1.26025 saw solid buying action as the day continued and Fed he acted as most traders believed he would. However, the FOMC statement and the Fed’s press conference provided a somewhat worrying outlook. The Fed has remained rather hawkish in its rhetoric, saying that another hike in the federal funds rate could come sooner rather than later, and that another hike is also likely later in 2023. The question now is whether financial institutions will believe what he said Federal Reserve System.
Although financial houses caused a slight sell-off in GBP/USD late last night and early this morning, GBP/USD remains within sight of highs. The question for day traders is whether GBP/USD’s upward momentum will sustain significantly, or whether incremental selling will bring the currency pair back to technical support levels.
Traders should prepare for choppy conditions in the near term as financial houses take a deep breath and make their decisions. GBP/USD’s upward momentum over the past three weeks of trading has been significant, but the currency pair may find itself having to prove it can sustain its current values.
- Retail sales data will come out of the US today, but unless there is a big surprise, financial institutions are unlikely to react much to the news.
- The Bank of England will publish its official bank rate decision next week, with a 0.25% increase expected.
Current Resistance: 1.26550
Current support: 1.26310
High Aim: 1.26890
Low Target: 1.26075