Working on Forex is essentially a betting game. The rate of a particular currency depends on which Central Bank will increase them faster and how quickly it will do it. Macro data make it possible to understand whether the criteria established by the regulator have been met, and the comments of officials clarify the position of the governing bodies. The fact that the Fed may raise the federal funds rate as early as 2022, and the ECB is unlikely to do so until 2024, contributes to the development of a downward trend in EUR/USD. With the pound, everything is more complicated.

Speaking before parliament, BoE Governor Andrew Bailey said that he is in the camp of those members of the Monetary Policy Committee who believe that inflation has reached the 2% target on a sustainable basis, and reserve capacity in the economy is decreasing, that is, it is recovering to pre-existing levels. Thus, the criteria for raising the repo rate have been met, and the first act of monetary restriction will take place in 2022, which, at first glance, paints a bullish picture for the sterling.

At the same time, the modest GDP growth in the UK by 0.1% MoM in July against the forecast of +0.5% indicates that the economy is losing steam. The delta strain outbreak has forced workers to isolate themselves and consumers to spend less. The situation risks further deteriorating if, despite the high proportion of the vaccinated population, COVID-19 continues to spread across Britain. The country's gross domestic product is currently 2.1% less than before the pandemic. It has not yet fully recovered, in contrast to its American counterpart, which did so in the second quarter.

UK GDP dynamics

If the reserve capacity in the economy has not been completely eliminated, there is clearly no need to rush to raise the repo rate. Goldman Sachs believes that the Bank of England will decide on the first act of monetary restriction only in the third quarter of 2023 due to the fact that the economy is in more downturn than the BoE believes. And then, due to the expiration of the government's wage support program on September 30, the situation will become even worse.

Such forecasts look worse than the expectations of the money market, which expects that the first increase in the repo rate will occur in May, and by the end of 2022 the indicator will be 28 bp higher than the current level, which does not exclude another rise at one of the BoE meetings. According to 56 Reuters experts, the first act of monetary restriction will take place in the fourth quarter of next year. This is a clear improvement in the estimate since, in the August survey, experts did not expect a rate hike earlier than 2023.

Thus, the Bank of England is able to outpace both the ECB and the Fed. The economic calendar will help investors understand how it will act. The week of September 17 is expected to be very busy. Data on the labor market, inflation, and retail sales are expected to be published, which increases the likelihood of increased turbulence in the sterling.

Technically, the combination of Double Top and Pin Bar reversal patterns on the GBP/USD daily chart indicates the seriousness of the bears' intentions. The consolidation of the quotes below 1.3825 (the bottom of the Pin bar) is a reason for selling the pound against the US dollar in the direction of 1.3765 and 1.372.

GBP/USD, Daily chart