British Pound Surges to Seven Week High Ahead of BOE Announcement

GBP/USD Daily Chart

The British Pound rallied sharply after the FOMC meeting on Wednesday, with GBP/USD reaching its highest levels since February 2nd in early trading on Thursday.

The move was driven largely by weakness in the US dollar. The Federal Reserve raised interest rates by 0.25% to a target range of 1.5% to 1.75% as expected, which is bullish for the dollar.

However, the greenback weakened as the Fed signaled two more hikes in 2018 rather than three. Additionally, during the press conference Fed chair Jerome Powell was cautious on inflation.

Technically, sterling is on the front foot ahead of the Bank of England (BOE) Monetary Policy meeting on Thursday.

Looking at the daily chart we can see that price remains above a well defined uptrend line and the 200 period simple moving average. RSI is curved upwards, reflecting bullish momentum.

Major resistance overhead stands at the prior high of 1.4342, while the upward sloping trendline forms dynamic support below, currently at 1.3847.

Analysts expect rates to be kept on hold at Thursday’s BOE Monetary Policy Committee meeting. Meanwhile, a rate rise of 0.25% in May is widely anticipated, and the market will be watching closely for signals relating to future rate hikes.

The pound was also boosted on Monday by news that the UK and EU have agreed on terms for a Brexit transition and Thursdays UK retail sales figure for February, which came in better than expected at 0.8%.