There is plenty of news on the UK economy expected this week. To begin with, the Bank of England (BoE) maintains one of the most conservative positions regarding the size of its interest rate — 4.75%. The same level of borrowing costs is in the US, but the American regulator has long stated its further steps to cut the rate. At the same time, the inflation rate in the UK is lower than in the US while unemployment figures are higher. Assuming that both countries are guided by similar principles of financial regulation, the BoE now has more arguments for a rate cut than the Fed.
There are a number of upcoming macroeconomic data reports due this week that are likely to encourage BoE officials to speed up policy easing.
Firstly, labor market data will be released on Tuesday. The unemployment rate is expected to rise from 4.3% up to 4.6%. Firstly, labor market data will be released on Tuesday. The unemployment rate is expected to rise from 4.3% up to 4.6%. Secondly, the data on consumer inflation in England will be published on Wednesday. According to the forecast, the Consumer Price Index (year-on-year) is projected to rise from 2.3% to 2.6%. And, thirdly, on Thursday, the Fed key meeting will be held at which the interest rate decision should be made.
Given the expected reports, it may be suggested that a rise in the unemployment rate above 4.5% and the CPI below 2.3% will indicate the urgent need for a rate cut to BoE officials.
In such a scenario, the GBPUSD currency pair is likely to plunge towards the 1.2500 level.
The overall recommendation is to sell GBPUSD, with the unemployment rate above 4.5% and the CPI below 2.3%.
Profits should be taken at the level of 1.2500. A Stop loss could be set at the level of 1.2750.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
