The British Pound rallied significantly during Monday’s trading session as the oversold condition turned a bit extreme. Nonetheless, it’s a market that’s in a downtrend for a reason, but we also have the Bank of England meeting this week and that’s of course going to cause some noise across the whole of the pound. For this reason, I would expect a lot of volatility in general, but I think given enough time, the British pound will return to its downtrend as there is a lot of concern. This is just an oversold bounce and of course a short hedge ahead of the central bank meeting.
GBP/USD Video 01.02.22
While the Bank of England is expected to raise interest rates and tighten them a little, the reality is that the US Dollar will continue to attract some attention due to the fact that there is a lot of concern. As long as this is the case, I just don’t see how the pound will take off in the longer term. The US dollar will continue to be attractive, but clearly markets cannot soar forever. While this is the case, we will occasionally have the opportunity to gain some value in this market whenever we have a small bounce like this.