GBP/USD trading pair caught a lot of attention with the Bank of England and the US Federal Reserve doing their best to support it after a losing but eventful week.
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The Bank of England increased the rate by 0.5%, creating history with a gloomy futuristic picture where recession is still a possibility. The cost of living will not be spared either, as the prices are expected to rise in the days to come. Projected CPI inflation could cross 13% in the fourth quarter.
Action is in place to tackle the matter, with banks being warned by the Bank of England of a further increase in the rates. This was obvious after Governor Bailey talked to BBC and stated they would have to raise the higher rates.
Not everyone shares the popular philosophy. Hugh Pill, a policy maker, is one such personality to have come out in public saying that no one can read into subsequent meetings the 50 basis point change was made while cautioning against the move.
The United States of America has balanced the slide by posting a positive employment report with 528,000 payrolls added in July 2022.
The unemployment rate went to the pre-pandemic era, with 3.5% being the currency trend. The factor has proved that recession is a lost story, with the US Federal Reserve agreeing to the same despite going through two consecutive quarters of contraction.
Chair Powell noted that there was a factor to make sense that recession would happen in the United States of America given the employment figures and other key areas combined.
What does not work well is the confidence the Fed has gained with this report as it is signaled to continue targeting inflation in the coming days. In other words, another rate hike could come on the registers in September, with a possibility of 0.75 being the word.
The GBP/USD pair is not doing well, though. It is currently somewhere around 1.21; however, there is optimism that the graph could skyrocket to 1.2294 if not 1.2407.
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The previous week had a minimal impact at the moment. The coming week is more important as the effects of the actions will be more visible at a macro level by then.