GBP/USD Who will come out on top between the FED and BOE?

12 Ara 2023

GBP/USD is currently trading in a sideways pattern, hovering around the 1.2560 level, particularly following the release of US inflation data. The upcoming week holds significant events, with the Federal Reserve (Fed) set to announce its monetary policy decision on Wednesday, followed by the Bank of England (BoE) on Thursday. Market consensus anticipates both central banks to maintain interest rates at their current levels. During the early European session on Tuesday, GBP/USD made an initial upward move towards the 1.2600 level but later reversed direction, closing negative for the day, and dropping below the critical 1.2550 support level. The direction of the pair could be influenced by the US inflation data for November, setting the stage for significant market movements leading up to the policy meetings of both the Federal Reserve (Fed) and the Bank of England (BoE). Notably, annual wage inflation in the UK, as measured by the change in Average Earnings Including Bonus, experienced a notable decline, dropping to 7.2% in the three months ending in October from its previous level of 8%. Average Earnings Excluding Bonus fared slightly better, rising by 7.3% in the same period but still down from the previous 7.8%. While the BoE is widely expected to maintain its policy stance this week, the softer wage inflation figures could be seen as a positive development for policymakers. They have been expressing concerns about robust wage growth potentially hindering their efforts to bring inflation back down to the target rate of 2%.