28.07.202617:42 Analisis Forex & Kajian: GBP/USD – Smart Money Analysis: Will the Bank of England Signal a Hawkish Policy Stance?

The GBP/USD pair has posted strong gains in recent weeks, which could mark the beginning of a bullish trend. However, the pound is currently undergoing a corrective pullback that began two weeks ago and has yet to run its course. Last week, the fundamental backdrop was not unfavourable for the pound, yet bears remained in control throughout the week. This week, the pound's decline has continued despite the absence of negative news from the UK, while the only major US economic report came in significantly weaker than expected. Unfortunately, Bullish Imbalance 23 failed to withstand the bearish pressure, although I previously noted that a third reaction to the same pattern would be highly unlikely.

On Wednesday evening, the outcome of the FOMC meeting will be announced, followed by the Bank of England policy decision on Thursday afternoon. Both events could trigger heightened volatility, and their outcomes cannot be predicted with certainty. More precisely, both central banks are widely expected to leave monetary policy unchanged. However, traders understand that any comment or hint from Andrew Bailey or Kevin Warsh, as well as any changes in the wording of the official statements, could generate a strong market reaction.

Should the pound expect support from the Bank of England? In my opinion, the answer is no. The latest UK inflation report for June showed that annual CPI slowed to 2.6%. There is little reason for the Bank of England to tighten monetary policy when inflation is already easing without additional policy restrictions. As a result, conditions for the pound could deteriorate further on Thursday, allowing the bulls to continue retreating.

Last week, oil prices climbed to $100 per barrel, and the consequences of renewed escalation in the Middle East and a blockade of the Strait of Hormuz could push prices as high as $120 per barrel. If events unfold according to the most pessimistic scenario, oil prices are likely to continue rising and exceed the highs recorded between March and May. In that case, inflation in both the United States and the United Kingdom could begin accelerating again. Conversely, if developments follow a more optimistic scenario, oil prices could return to the $60–70 per barrel range. Under those conditions, the Federal Reserve might not need to tighten monetary policy, while the Bank of England is already no longer facing a significant inflation problem. Consequently, the dollar currently cannot rely on a hawkish stance from the Fed, but the pound also lacks support from its own central bank.

Technical analysis shows that the bullish advance was unexpectedly replaced by renewed bearish pressure. No bearish patterns or signals emerged before the decline began, and the bulls' only source of support—Bullish Imbalance 23—failed. As a result, the bears have regained control and now have Bearish Imbalance 24, which may be used as an area for considering short positions. There are currently no other notable patterns.

There was virtually no significant macroeconomic news on Tuesday. Nevertheless, the dollar strengthened despite the only US economic report coming in well below market expectations. It appears that traders have already shifted their focus to the upcoming Federal Reserve and Bank of England meetings and believe that the Fed has a much greater chance of raising interest rates than its UK counterpart. There is little else that explains the dollar's latest advance.

Overall, I still believe that the long-term fundamental backdrop points towards a weaker US dollar. Neither the conflict between Iran and the United States nor the possibility of Federal Reserve rate hikes in 2026 has changed that view. Geopolitical tensions reminded the market of the dollar's safe-haven status for several months, but the conflict has already passed its most active phase. The Fed intends to raise interest rates in 2026, which is undoubtedly supportive for the dollar. However, it should not be forgotten that tighter monetary policy is likely to slow economic growth and weaken the labour market. Moreover, Kevin Warsh was appointed by Donald Trump to lead the FOMC in order to pursue a more accommodative monetary policy—something that, in Trump's view, Jerome Powell was unwilling to deliver. Therefore, in my opinion, any appreciation of the dollar is likely to be temporary rather than structural.

Economic Calendar (US and UK)

United States

• FOMC Interest Rate Decision — 18:00 UTC
• FOMC Press Conference — 18:30 UTC

The economic calendar for July 29 contains two major events, both of which are highly important. As a result, the economic backdrop could have a significant impact on market sentiment during the second half of Wednesday's session.

GBP/USD Forecast and Trading Tips

The long-term outlook for the pound remains bullish, but buyers have so far failed to launch a sustained advance. After liquidity was taken from the two most recent swing points, bulls mounted a solid recovery, only for bears to regain control without any obvious catalyst. As a result, the pound may continue declining towards 1.3007, the level that would invalidate the bullish trend. However, fresh bearish signals will be needed to support such a move, and none have emerged so far.

For bears, the 1.3392–1.3415 level remains critical, as it contains Bearish Imbalance 24. Short positions should only be considered within this pattern. At present, the bulls have no meaningful technical support.