GBP/USD – Consolidation as traders eye BoE and Fed meetings

• Fed could signal a March rate cut is on the cards
• Will the BoE forecasts offer any insight on interest rates?
• Cable continues to consolidate ahead of central bank meetings

This is widely expected to be the year of rate cuts for major central banks after a period of aggressive tightening that will soon get inflation back to target.

Going into 2024, traders became incredibly optimistic about just how many rate cuts we could see this year and those expectations have since been pared back but have they gone far enough?

Central bank policymakers have been determined to cool expectations in recent weeks but that could change this week if there is any hope of rate cuts this spring.

The Federal Reserve is widely expected to be the first central bank to cut rates, potentially in March, although traders are less convinced it will be so early than they were. The meeting on Wednesday could be an opportunity to signal it as a live meeting considering the progress it has continued to make to get inflation back to target.

Then it’s onto the Bank of England meeting on Thursday where we may not get a strong signal of an impending rate cut but will get new economic forecasts that could offer some insight into the possibility of a move in May.

Consolidation continues but that could soon change

Cable has been in conolidation since the middle of last month, with little indication of which direction any breakout will occur, let alone when.

GBPUSD Daily

Source – OANDA

We’ve seen strong resistance around 1.28 just above the 61.8% Fibonacci retracement level and equally strong support around 1.26. While we’ve seen a break of a rising trendline that could suggest there’s a slight bearish bias, I’m no longer convinced of it’s significance as the consolidation has just continued since.

A break of either will send a strong signal, particularly 1.26 as – based on the size of the topping formation – it could offer some insight into the size of the move we could see lower.

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