Jakarta, GIC Trade – The pound sterling is in the $1.27-1.28 range, not far from the one-month low reached last Thursday after the Bank of England (BoE) raised interest rates by 25bps, a reduction from the 50 basis points increase in June.

This decision has put pressure on the pound as the sharper 50bps increase was still being considered by many market players, given recent data confirming that UK inflation remains higher than that of other European economies.

Meanwhile, policymakers continue to grapple with the conflicting needs of reducing inflation amidst evidence that higher borrowing costs have significantly impacted the UK economy, as reflected in plummeting mortgage demand and a weakening manufacturing sector.

This week, investors are awaiting the preliminary forecast for the second quarter (Q2) Gross Domestic Product (GDP) to show that the UK economy maintained its growth momentum from April through June.

On the other hand, the dollar index (DXY) retreated to 102.2 in Thursday’s trading as traders grew cautious ahead of the key US inflation reading, which could influence the Federal Reserve's policy decision in September.

Investors expect the inflation rate to rise to 3.3% from 3% in June, marking the first main inflation increase since June 2022, largely reflecting the base-year effect from energy costs. Meanwhile, core inflation is expected to remain stable at 4.8%, still well above the Federal Reserve’s 2 percent target.

Previously, DXY movements were driven by strong US economic data, expectations that the US central bank would maintain monetary policy restrictions for some time, concerns about the US banking sector, and economic uncertainty in China.

Fundamentally, the 25bps rate increase, below market expectations for a 50bps rise, has weighed on the pound sterling. Now, let’s take a look at the technical analysis:

Technical Analysis



GBP/USD on the 1-hour period is attempting to move upward, touching the resistance level at 1.27660 again and heading toward the next resistance level at 1.28080. The upward trend is also evident from the FXBot template, where the GBP index is 6.2, higher than the USD index at 3.4. Meanwhile, the bullish bias is also supported by a buy signal, indicated by a green arrow.

This Forex and Commodity analysis is based on the author’s view from a fundamental and technical perspective, not intended as advice or solicitation. For more information, click the image below.