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Market participants will be following the speech of Federal Resreve Chairman Jerome Powell at the Swedish central bank's International Symposium on Central Bank Independence starting at 14:00 (GMT). According to the CME Group, market participants are pricing in almost 80% of the probability of a 25 basis point Fed rate hike on February 1. Nevertheless, Fed officials are pushing for a continuation of the tight monetary policy cycle through 2024. This, in particular, was stated yesterday by Atlanta Fed President Raphael Bostic.
Now it is important for market participants to hear Powell's opinion on this matter. If he also takes a tough stance on this issue, the dollar will have a chance to regain its recently lost ground.
The publication of consumer inflation statistics for December on Thursday will also be of importance for investors. The dollar will also strengthen its position if the data indicate a resumption of inflation growth. If not, the dollar may fall under a new wave of sales.
As for the pound, today, it is declining against the U.S. currency after strong growth in the past two days.
If investors mainly expect a slowdown in the monetary policy tightening cycle from the Fed, then from the Bank of England—a further increase in the interest rate by 1.0% and up to 4.50% by the summer (now the Bank of England's interest rate is at 3.50%).
The pound is also slightly supported by macroeconomic statistics, according to which retail sales (from the British Retail Consortium) rose by 6.5% in December, accelerating from 4.1% in November. On Friday, the November data on British GDP is expected (estimated to decline from 0.5% to -0.3%), as well as the publication of statistics on industrial production, which on a monthly basis may be adjusted from 0.2% to -0.3% (from -2.4% to -3.0% in annual terms), putting pressure on the pound.
From a technical point of view, the GBP/USD is trying to gain a foothold in the medium-term bull market zone: the pair is above the 1.2110 key support level. To consolidate its success, it needs to break into the area above the long-term resistance level 1.2230 to head towards the key resistance levels 1.2750, 1.2900, separating the long-term bullish from bearish trend.
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