GBP/USD bulls take on the bears and eye 1.40 area and BoE

• GBP/USD bulls are back in town and target the 1.40 are.
• All eyes are not on the bank of England and the interest rate decision.

GBP/USD is trading at 1.3930 and up nearly 1% having climbed from a low of 1.3786 to a high of 1.3934.

The pound has recovered from its lowest level versus the dollar since April as the greenback corrects after the US Federal Reserve surprised the market with a hawkish hold last Wednesday.

The Fed has brought forward the prospects of the timing of an interest rate hike and end emergency bond-buying. 

This has put the focus on the Bank of England that announces its latest decision at 12:00 BST on Thursday 24 June. 

There will be no new forecasts this time, and policy changes are unlikely. However, a more optimistic economic assessment from the Bank of England could push sterling over the line. 1.4000 will be eyed. 

UK inflation is a hot topic. UK inflation hit its highest in nearly two years.

Investors brought forward bets that the BoE would raise interest rates sooner than they thought previously, flattening the yield curve for British government bonds and mirroring a recent move in US Treasuries.

A recent speech by a normally-dovish committee member, Gertjan Vlieghe, has sparked a debate on whether the Bank of England will hike rates in 2022, ahead of the Fed.  He will shortly leave his post, but he was floating the possibility of a hike later into 2022.

Currency markets are fully pricing in a 30 basis point hike in rates by the BoE by December 2022 and MPC members look set to remain divided over whether to pull the plug on their 875 billion-pound ($1.2 trillion) government bond purchase programme.

GBP/USD technical analysis

The weekly chart shows that the price is in a correction towards the 38.2% and 505 Fibonaccis that align with old structure and the psychological 1.40 area.