- Bailey warned the BOE would focus on battling inflation despite banking stress.
- Bailey stressed that British banks remained strong and could sustain the country’s economy.
- Financial markets expect the BoE to raise interest rates one more time.
Today’s GBP/USD price analysis is bullish. The pound rose after Bank of England Governor Andrew Bailey’s speech. He warned that interest rate-setters would focus on battling inflation and not be swayed by fears about the banking system.
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Some investors have suggested that central banks should consider banking turbulence when determining interest rates.
On Sunday, Erik Nielsen, group chief economic advisor at UniCredit in London, argued that central banks shouldn’t isolate monetary policy from financial stability. He said concerns about the possibility of a wider financial catastrophe are at an all-time high.
Despite “big strains” in the global banking industry, Bailey stressed that British banks remained strong and could sustain the country’s economy.
Since December 2021, the BoE has tightened policy several times, pushing the Bank Rate from 0.1% to 4.25%. On Monday, financial markets predicted that the BoE would raise interest rates again this year to a maximum of 4.5%. The probability of a hike in May is 52%.
It’s too early, according to Bailey, to judge whether the stress on the world financial system has led to a tightening of credit conditions in Britain.
Despite the high-profile bank failures like Silicon Valley Bank and Credit Suisse, the Swiss National Bank, the Fed, and the ECB have hiked rates this month.
GBP/USD key events today
The Bank of England governor will speak again today. Investors will pay attention to any hints on future policy moves. There will also be a consumer confidence report from the US.
GBP/USD technical price analysis: Aiming for 1.2345 resistance level
The 4-hour chart shows GBP/USD trading above the 30-SMA with the RSI above the 50-level. This indicates bullish strength and follows a failed attempt at reversing the trend. Bears had broken below the 30-SMA after the bullish move paused at the 1.2345 resistance.
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However, they failed to go below the 1.2203 support, where bulls returned and took over. Bulls broke above the 30-SMA and are approaching the 1.2345 resistance. The bullish trend will continue if the price breaks above this resistance to make a new high.
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