British Pound edges higher despite delaying BoE rate hike expectations

The British Pound (GBP) has shown an upward trend, despite the Bank of England (BoE) not yet raising interest rates as initially expected. During the Asian trading hours on Friday, GBP/USD climbed towards 1.3600. However, the Pound may face challenges due to recent drops in oil prices, which are alleviating immediate inflation worries.

Financial markets now anticipate only 24 basis points of policy tightening by December and 36 basis points by February 2027, according to LSEG pricing data. Prior to the BoE's September meeting, less than 4 basis points are priced in, indicating a 15% chance of a rate hike. Major economists believe interest rates will remain steady at 3.75% through the year.

This assessment is based on a mixed economic situation, where UK inflation rose to 2.9% in July, mainly due to higher energy costs, and is expected to increase further. Despite a weak labor market, GBP may not gain much traction in the near term, as there are limited major releases and the BoE's recent messaging has been restrained.

Forex traders are now focusing on the annual economic symposium in Jackson Hole, Wyoming, where Federal Reserve Chairman Kevin Warsh is set to deliver a speech. Current market data indicates that implied volatility ahead of the speech is low, suggesting a lack of concern about potential impacts on the market. On the technical side, GBP/USD is currently trading at 1.3600 and shows a bullish bias, as it is above both the nine- and 50-period Exponential Moving Averages (EMAs).

The 14-period Relative Strength Index (RSI) is at 61, which is positive without being overbought. Support is found at the 9-period EMA at 1.3593, while deeper support can be found at the 50-period EMA at 1.3478. As long as GBP/USD stays above these moving-average supports on a closing basis, the overall bullish outlook is expected to continue.