From a monetary policy perspective, the Bank of England unanimously decided at the beginning of this month, with a 9-0 vote, to maintain its benchmark interest rate at 3.75%. Concurrently, they rescinded prior expectations of three rate cuts by 2026, signaling a distinct hawkish pivot. Nevertheless, debate persists regarding whether the market has excessively repriced the Bank of England's hawkish stance. A Citi survey indicated that the inflation expectations gauge for UK households surged from 3.3% to 5.4%, marking the largest single jump in over two decades. This sharp deterioration in inflation expectations reinforces the necessity for the Bank of England to sustain a tight policy, yet it simultaneously heightens market concerns about the economic growth outlook. While OCBC strategists noted that the Sterling has demonstrated relative strength since the onset of the Iran conflict, partly bolstered by the sharp hawkish repricing of UK interest rate expectations, they cautioned that this repricing might be excessive given the UK's decelerating economic growth, energy-driven uncertainties, and escalating fiscal risks. They observed that geopolitical events have relegated domestic politics to a secondary concern; however, energy shocks and upcoming local elections could increase the likelihood of more expansionary fiscal policies. These mounting fiscal concerns contribute to their more cautious outlook for the pound.

Analyzing the GBPUSD in the 1D timeframe, the Bollinger Bands are narrowing, and the moving averages are flattening. The price is oscillating near the EMA12, indicating a potential shift in trend. Resistance is identified at the psychological level of 1.34 and the upper Bollinger Band at 1.354. The MACD has formed a golden cross, with the MACD line and signal line pulling back towards the zero line. The distance suggests the rebound is not yet complete. The RSI is at 45, reflecting predominantly bearish investor sentiment. In the 4H timeframe, the Bollinger Bands are contracting, and the moving averages are flat, with the price consolidating within a triangle pattern. Short-term analysis suggests the rebound is ongoing and likely to reach the upper Bollinger Band. The RSI is at 44, indicating prevailing bearish market sentiment. The trading strategy recommends buying on dips.

Trading Direction: Buy

Entry Price: 1.333

Target Price: 1.37

Stop Loss: 1.32

Support: 1.32, 1.3, 1.28

Resistance: 1.35, 1.38, 1.41