The pound-dollar pair is still unable to determine the direction of its movement: the daily chart of GBP/USD resembles a piano consisting of black and white keys. Only Friday's Nonfarm results were able to push the pair out of the price range of 1.3870-1.3930, within which it has been trading since July 28. But de facto, the bears could not take advantage of the current situation: the pair sank only to the level of 1.3850, after which it lay down to drift. Despite the general strengthening of the US dollar, the pound manages to keep on the defensive, keeping the pair from falling into the area of the 37th figure and below. Such stress resistance of the sterling is due to several fundamental factors, which we will discuss below.
In general, almost all dollar pairs of the "major group" are more or less subject to the strengthening of "hawkish expectations" regarding the Fed's further actions. The only exception is the NZD/USD pair, taking into account the latest decisions of the New Zealand regulator. Let me remind you that the Reserve Bank of New Zealand at the last meeting curtailed its stimulus program and hinted at an interest rate increase in the near future. Against the background of the latest inflation data, which were published on the island state, the first rate increase can be expected in the fall.
The Bank of England, in turn, cannot boast of such a hawkish attitude. And although the British regulator did not implement the most pessimistic scenarios at its last meeting, the overwhelming majority of Central Bank representatives were not ready to talk about the "roadmap" for the normalization of monetary policy. On the other hand, the Bank of England takes a less categorical position compared to, say, the ECB. If representatives of the European Central Bank exclude the option of early curtailment of QE, then their British colleagues allow a similar scenario. In particular, Andrew Bailey said last week that "if the economy, inflation, and the labor market continue to grow, then some moderate tightening of monetary policy parameters will probably be required." After this phrase, the GBP/USD pair jumped to the level of 1.3950, but could not overcome this resistance level, which corresponds to the lower border of the Kumo cloud on the D1 time frame.
On the one hand, the wording of the accompanying statement and the phrases of Andrew Bailey were rather vague: there were too many "ifs" and very few specifics. But, on the other hand, traders were clearly set up for a more "dovish" mood, so the key messages of the head of the regulator helped the buyers of GBP/USD to approach the upper limit of the range of 1.3870-1.3950 at the end of the August meeting. However, just for a day, US nonfarm payrolls have again redrawn the fundamental picture for the pair, strengthening the position of the greenback. As a result, both buyers and sellers of the pair remained at the broken level. The first "hawkish" hints from the Bank of England allowed the pound to see the 40th figure on the horizon, while strong data on the growth of the US labor market leveled all the achievements of the GBP/USD bulls. Traders froze in anticipation of the next information impulses.
In this context, two releases will play a decisive role. First, the release of data on the growth of American inflation (Wednesday, 12:30 UTC), and secondly, the release of data on the growth of the British economy (Thursday, 06:00 UTC).
According to preliminary forecasts, the growth of inflation in the United States in July will slow down slightly after a multi-month consecutive growth (on an annualized basis). If this forecast does not come true, and the consumer price index updates another multi-year record, the greenback's position will significantly strengthen. Such trends against the background of strong nonfarm payrolls will suggest that the Federal Reserve will hint about its intentions to curtail QE already at the September meeting. Some experts also admit a more optimistic option, according to which Jerome Powell will make a corresponding statement even earlier – at the end of August, within the framework of an economic symposium in Jackson Hole.
As for the British release, the situation is as follows. On Thursday, data on the growth of the UK economy for both the second quarter and June will be published. The general expectations of experts are positive. For example, on a quarterly basis, the country's GDP should increase by 4.8% in Q2 (after a decline of 1.6% in the first quarter). On an annual basis, the indicator should immediately jump by 22.5% (in the first quarter, the indicator came out at -6.1%). Positive dynamics is also expected in monthly terms. It should be noted here that experts' expectations are somewhat inflated, so the pound may significantly weaken its position if the release came out in the "red zone".
In general, in my opinion, the GBP/USD pair will be under background pressure in the coming days, which may strengthen or weaken following the results of the two above-mentioned releases. The uncorrelation of the positions of the Fed and the Bank of England will, in any case, play against the pound sterling – the intentions of the British regulator look very vague and amorphous, while many members of the Fed are already "directly" calling for the first steps to normalize monetary policy. In particular, an unexpectedly hawkish position was recently voiced by the Federal Reserve Vice Chairman Richard Clarida, who allowed an early curtailment of QE and an increase in the interest rate at the end of next year.
From a technical point of view, the GBP/USD pair on the D1 time frame is located between the upper and middle lines of the Bollinger Bands indicator, as well as under the Kumo cloud, but between the Tenkan-sen and Kijun-sen lines. All this indicates an uncertain situation. The first support level (the initial target of the downward movement is located at 1.3820) is the average line of the Bollinger Bands on the daily chart. If it is overcome, we can consider short positions to the next support level at 1.3770 (the Kijun-sen line on the same time frame). It is too early to talk about lower values, given the significance of future events of a fundamental nature.