British pound edges higher ahead of BoE’s Bailey testimony

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<li>BoE’s Bailey to testify before parliamentary committee</li>
</ul>
<p>The British pound is slightly higher at the start of the week. In the North American session, GBP/USD is trading at 1.2495, up 0.27%. The pound is coming off an excellent week, having gained 1.93%.</p>
<p>It’s a very light data calendar on Monday, with no major releases out of the UK or the US. We’ll hear from Bank of England Governor Bailey later and the markets will be looking for some clues about future rate policy.</p>
<p><strong>Markets sniff a rate cut</strong></p>
<p>On Tuesday, Bailey testifies before the Parliament’s Treasury Committee. Lawmakers will undoubtedly press the Governor about rate policy, given that inflation is falling. There is growing speculation that the BoE has winded up its current tightening cycle and will rate cutes sometime in mid-2024, perhaps as early as May.</p>
<p>The BoE holds its next meeting on December 14th and the markets are widely expecting the central bank to hold rates, after pausing at the last two meetings. Governor Bailey and his colleagues have insisted that rate cuts are a long way off, and the MPC said at the November meeting that rates need to remain higher for longer.</p>
<p>Inflation fell to 4.6% in October, down from 6.7% a month earlier. The driver behind the downswing was lower energy prices, which helped send inflation below 5% for the first time in two years. The drop in energy prices didn’t affect core CPI, which also dropped from 6.1% to 5.7%.</p>
<p>The US releases the minutes of its November meeting on Tuesday. At the meeting, the Fed paused for a second straight time and the markets have priced in another pause at the December meeting at virtually 100%, with expectations of a rate cut in mid-2024.</p>
<p>.</p>
<p><strong>GBP/USD Technical</strong></p>
<ul>
<li>GBP/USD is testing resistance at 1.2476. Above, there is resistance at 1.2575</li>
<li>1.2394 and 1.2312 are the next support levels</li>
</ul>
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