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Are the monetary policies of the Fed, ECB and BoE tightening?

England Monetary Policy Review

The Fed last week confirmed the end of asset purchases at the beginning of March, followed by a first rate hike in the same month and anticipates 4 hikes in 2022, as well as a reduction in its balance sheet, which currently reaches almost 9000 billion. That is about 4 times the French GDP.

The ECB, which seems to be stalling on the Fed with a lag of a few months, is expected to be reassuring again on asset purchases and rate hikes. Yet inflation accelerated once again in December, well above the European central bank's 2% target. Recall that one of the main goals of the ECB is ... price stability, failure.

The UK is experiencing record inflation and the effects of Brexit. The Bank of England was the first of the major central banks to raise its key interest rate in December and is expected to raise it again tomorrow. We will be paying attention to the timing of the BoE's rate hikes afterwards, which could set the tone on the GBP/USD pair.

A less accommodative tone, including several rate hikes in 2022, could be positive for the GBP/USD, especially since the US dollar is reducing its rebound, now that the FOMC has passed.

Technical analysis of GBP/USD in daily data

The GBP/USD price continues its rebound initiated last December and despite a correction observed in January due to the rise of the US dollar, the cross retains a bullish technical and fundamental perspective.

Currently in contact with the 100-period moving average and the psychological threshold of 1.3500, the GBPUSD could validate the crossing of the latter and continue its rise towards the former important support of summer 2021, also corresponding to the Fibonacci retracement of 23.6% (increase from March 2020 to June 2021) to 1.3580/1.3600. A test of the 2008 moving average, currently at 1.3643, could be found.

On the contrary, a failure to hold above the MM100 should invalidate this short-term bullish scenario and lead to a return to the recent low, which had already served as support in November 2021 and located at 1.3350.

 

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