GBP/USD: BoE to deliver another dovish central bank surprise this week?

Major central banks have delivered dovish surprises this week
The Bank of England will announce its rate decision on Thursday following undershoots in inflation and wage data
Despite downside risks from a possible dovish hold, buying dips in GBP/USD is preferred

The trend among G10 FX central banks this week has been to deliver dovish surprises relative to market expectations. The Reserve Bank of Australia ditched its tightening bias, the Bank of Japan said large scale quantitative easing will continue despite hiking rates for the first time in nearly two decades while the Fed stuck to three cuts in 2024 and said it plans to its taper its quantitative easing program ‘fairly soon’.

That provides an interesting backdrop for GBP/USD traders ahead of the Bank of England meeting later Thursday, especially after the small undershoot in UK underlying and headline inflation reported in February, following a similar outcome in wages growth.

Will the thinning herd of inflation hawks on the monetary policy committee become even smaller, paving the way for another central bank dovish surprise? If the trend continues, a reversal of the reversal could be on the cards for GBP/USD.

Buying GBP/USD dips preferred, unless uptrend breaks

For now, buying dips remains the preferred way to play cable, especially after the Fed made it clear it intends to cut rates multiple times this year unless provided compelling evidence to do otherwise.

Under a dovish hold scenario from the BoE – which would continue the theme from major central banks this week – dips towards existing uptrend support offer decent entry points for longs, especially should the price test and hold above the level. With a stop below the trendline for protection, traders could target the March high around 1.2894 with a potential test of 1.3000 after that.

Alternatively, a hawkish hold may see GBP/USD break back above 1.2800, putting it on track to retest of 1.2894 set on the false break earlier this month. If we do see a bullish break, make sure you evaluate the risk-reward with an appropriately placed stop-loss order below 1.2800 for protection.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.