Forex Market: GBP/USD daily forecast

During yesterday’s trading session GBP/USD traded within the range of 1.6938-1.6990 and closed at 1.6961.

At 6:55 GMT today GBP/USD was gaining 0.02% for the day to trade at 1.6966. The pair touched a daily high at 1.6971 at 6:45 GMT.

Fundamental view

United Kingdom

The minutes of Bank of England will probably show that central bank’s policy makers were unanimous in keeping the interest rate unchanged at record low 0.5% at their last policy meeting on May 8.

The Bank of England was given the responsibility of determining the basic interest rates in 1998, in order to meet the challenges posted by the government inflation target. Decisions are taken by the Monetary Policy Committee of the central bank. The Committee consists of nine members and meets monthly. Minutes are usually published on Wednesday, two weeks after the policy meeting. The format of voting is number of members that voted for an increase of borrowing costs, number of members that wanted a reduction and the total number of members, that have voting rights.

If the minutes reveal the members weren’t unanimous in taking the decision, this would heighten the appeal of the pound as it can be an early indication that borrowing costs may be raised sooner-than-projected.

Bank of England is scheduled to release the minutes from its last meeting at 08:30 GMT.

United States

The Federal Open Market Committee (FOMC) will probably keep its benchmark interest rate unchanged at a record-low 0.25% for a 43rd consecutive meeting. In addition, the FOMC members will probably reduce the pace of monthly asset purchases by another $10 billion to $35 billion, according to the median estimate by experts.

The FOMC meets eight times each year to review economic and financial conditions and decide on monetary policy. Monetary policy refers to the actions taken that affect the availability and cost of money and credit. At these meetings, short-term interest rate targets are determined. Using economic indicators such as the GDP Deflator, Consumer Price Index(CPI) and the Producer Price Indexes (PPI), the Fed will establish interest rate targets intended to keep the economy in balance. By moving interest rate targets up or down, the Fed attempts to achieve maximum employment, stable prices and stable economic growth. The Fed will raise interest rate, or act hawkish, to decrease inflation. Conversely, the Fed will decrease rates, or act dovish, to accelerate inflation and spur economic growth.

Investors and traders keep a close eye on the FOMCs rate decisions. After each of the eight FOMC meetings, an announcement is made regarding the Fed’s decision to increase, decrease or maintain key interest rates.

The FOMC will announce its interest rate decision and pace of monthly asset purchases at 18:00 GMT. In case, the central banks members cut the monthly asset purchases by $10 billion (in line with expectations), this will certainly boost greenbacks demand.

Technical view

According to Binary Tribune’s daily analysis, in case GBP/USD manages to breach the first resistance level at 1.6988, it will probably continue up to test 1.7015. In case the second key resistance is broken, the pair will probably attempt to advance to 1.7040.

If GBP/USD manages to breach the first key support at 1.6936, it will probably continue to slide and test 1.6911. With this second key support broken, the movement to the downside will probably continue to 1.6884.