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Super Thursday preview: What to expect of GBP pairs?

FXStreet (Mumbai) - Sterling has remained relatively resilient amid broad based USD rally witnessed since last week, thereby keeping GBP/USD pair near 1.54 handle ahead of the Bank of England (BOE) events – rate decision, minutes, Quarterly Inflation Report (QIR) and Carney’s presser.

Focus on QIR, vote count and Carney’s comments

No one expects the bank to alter its policy today, but the QIR and vote count could throw a light on the possible timing of the rate hike. Carney’s comments on the inflation, Sterling exchange rate could affect rate hike expectations as well.

The economic calendar says the markets expect the vote count to stay unchanged at 8-1. However, in light of the strong economic data, a significant majority in the markets expect vote count to come-in at 7-2. On the other hand, a dovish threat could come-in the form of a downward revision of the core inflation forecasts.

An outright hawkish stance could see Sterling shoot higher across the board. A major loser in this case could be EUR/GBP. GBP/JPY and GBP/NZD could see sharp gains as well. On the other hand, a dovish surprise could lead to a sell-off in the GBP/USD and a sharp recovery in the oversold EUR/GBP pair. GBP/AUD could also drop sharply. A more balanced stance by the BOE could see minor moves in cable and EUR/GP pair, but may end up being a non-event for the markets.

GBP/USD Technical Levels

At 1.5409, the immediate resistance and support is seen at 1.5409 (38.2% of Apr-Jun rally) and 1.5350 (50% of Jan 2009 low-July 2014 high). A dovish stance could trigger a break below 1.5350 and send the pair lower to 1.5277 (support of the rising trend line Oct1 low-Oct 29 low), 1.5248 (50% of Apr-Jun rally). On the other hand, a hawkish stance could push the pair above 1.5409 and towards 1.55. A break above 1.55 would open doors for 1.5568 (38.2% of July 2014-Apr 2015 plunge).

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