GBP/USD Grows Restless Ahead of BoE and Fed Meetings
Volatility In The GBP/USD Is On The Rise
by Bogdan Giulvezan
The Pound/Dollar is currently trading at 1.3940 and is still stuck inside an ascending channel, despite an apparent break posted in late February. The week has started with a slow pace thus far, with the Pound making small advances against the greenback, but the week’s narrative revolves around the BoE and Fed interest rates decisions, which will probably be the key factors for the pair’s medium-term movement.
Key Events for the Week Ahead
The first important release of the week is scheduled for Tuesday, March 16 at 12:30 pm GMT, in the form of U.S. Retail Sales. The report shows changes in the total value of sales made at retail levels and has a strong impact on the US Dollar because consumer spending represents the largest part of the entire economic activity. The expected change is -0.5% (previous was 5.3%) and usually, numbers below expectations weaken the greenback. At the same time, the Core version (excludes automobiles) will be released, with an expected 0.2% change from the previous 5.9%.
Wednesday, March 17, a cluster of events will affect the US Dollar: at 6:00 pm GMT the FOMC will release the Economic Projections for inflation and economic growth for the next 2 years, as well as the FOMC Statement which contains the outcome of the interest rate votes and the reasons that determined them. The rate is not expected to change, but as always, any hints about future hikes or cuts will have a notable impact on the greenback. Half an hour later, at 6:30 pm GMT, the Federal Reserve Chair will hold a press conference, which is usually accompanied by USD volatility.
Thursday, March 18 it’s BoE’s turn to release similar data: the Official Bank Rate, the MPC Rate Votes, and the Monetary Policy Summary, which contains insights into the reasons that influenced the rate votes. All releases are scheduled at 12:00 pm GMT and although no rate change is anticipated, the Pound is likely to react to any clues regarding future votes.
Chart Analysis – GBP/USD
The pair has been trading obediently inside an ascending channel since late September 2020 and in late February 2021 it managed to peek its head above the upper boundary but the incursion outside the channel proved short-lived.
Currently, price is coming off highs above 1.4200 and trading close to the lower boundary of the channel but it looks like the pattern is still too strong to break. And because both currencies in the pair are expecting big news later in the week, we may see some range-bound trading until the actual events take place.
Support is represented by the confluence zone created by the lower channel line and the 50-period Moving Average (blue line), followed by the horizontal level at 1.3700. Resistance is represented by 1.4200 and the upper channel line, and a clear break of either zone is likely to trigger additional movement in that direction.
