Daily Analysis GBPUSD - 21 June 2023

Consumer price inflation in the United Kingdom remained steady at 8.7 percent in May 2023, maintaining the same level as the previous month's 13-month low. This figure exceeded market expectations of 8.4 percent. The persistently high inflation rate raises concerns about its persistence and puts additional pressure on policymakers to continue with the Bank of England's ongoing tightening campaign. While the market has priced in a 0.25 percent increase in the upcoming BOE rate decision tomorrow, the focus now shifts to the terminal rate level. Market projections indicate a rate of 6 percent, but such high rates are worrisome as they could potentially trigger a recession, particularly starting with the housing market, which may struggle to withstand such elevated interest rates.

The yields on 2-year Gilt bonds have surpassed 5 percent, indicating expectations of further rate hikes, and suggesting that the cycle of tightening monetary policy is now anticipated to be longer than previously anticipated.

The GBP/USD currency pair underwent a correction over the past two days, primarily due to the strength exhibited by the US Dollar. However, the sentiment remains bullish for the GBP, along with other major currencies, as the fundamental factors support a positive outlook. It is important to note that the rate hike expected during tomorrow's Bank of England (BOE) meeting has already been priced. Investors will now eagerly await the BOE President's comments, hoping for a more hawkish stance regarding future rate decisions.

Looking ahead, the next resistance level for GBP/USD is anticipated to be around 1.3000. However, if the correction persists, there is a possibility that the price may test the 1.2700 level once again.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3200	1.3000	1.2800	1.2650	1.2540	1.2460