• Hawkish sentiment surrounding BOE favors the Sterling.
• St. Louis Federal Reserve President James Bullard sounded cautious on rate hike after May , weighs on US dollar.
• Upbeat economic data favors the uptrend of Cable.

Cable is trading high with upbeat economic data and hawkish sentiment surrounding BoE favoring the pound.

Rate hike expectation from BOE favors the pound. Investors are fully priced a 25-basis-point rise in the BoE’s main interest rate to 0.50% on Feb. 3 and economists poll by Reuters also expect that outcome from the meeting. At the moment, money markets are pricing the BoE’s main rate to be about 1.25% by the end of the year.

0.5% level is expected to be hit on Thursday and traders are wondering how soon and how fast the bank will start reducing its balance sheet and stop reinvesting maturing gilts.

Elsewhere, Britain Markit/CIPS Manufacturing PMI came with a reading of 57.3 which exceeds the forecast and prior readout of 59.6 This is supporting the view that the British economy is still handsomely rebounding from the COVID-19 recession and favors the pound.

On the other hand, A chorus of Fed officials said on Monday they would raise interest rates in March, but spoke cautiously about what might follow and indicated a desire to keep options open given an uncertain inflation outlook.

St. Louis Federal Reserve President James Bullard on Tuesday said he favors lifting rates at the U.S. central bank’s meeting in March and likely again in May. But he pushed back against the idea of kicking off the tightening cycle with a half-percentage point hike, and said that how high the Fed will ultimately need to lift rates is an “open question.”

Bullard told “The point of this is to get (monetary policy) better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not.”

GBP/USD 4 Hour Chart:

Support: 1.3460 (S1), 1.3401 (S2), 1.3367 (S3).

Resistance: 1.3553 (R1), 1.3587 (R2), 1.3646 (R3).

Hawkish expectation from BOE and upbeat economic data favors the pound meanwhile Fed policymakers hesitance in rate hike weighs on US dollar. We expect a bullish trend for GBP/USD.