GBP/USD rises ahead of the BoE
GBP/USD is rising towards 1.35, its highest level since April 9, following a hawkish hold from the Federal Reserve and ahead of the Bank of England interest rate decision today.
The Bank of England is expected to leave rates on hold at 3.75%, as policymakers adopt a wait-and-see approach to assess risks from the ongoing energy shock.
After a hawkish March meeting, more recent communication from Governor Andrew Bailey has tempered expectations, signalling that a near-term rate hike is unlikely and supporting expectations for a hold. However, after a unanimous decision last month, the Monetary Policy Committee vote split could tilt more hawkish this time, amid rising inflation risks and stronger-than-expected PMI data in April.
A hold would give policymakers time to assess how higher oil prices feed through to the broader economy. Headline inflation has risen to 3.3%, while core inflation came in softer than expected at 3.1% in March. Officials are likely to wait for clearer evidence of second-round effects on wages and underlying inflation before tightening policy.
At the same time, the growth backdrop remains mixed. While inflation risks are rising, Bailey has pointed to a softer labour market as a counterbalance.
The BoE meeting follows a hawkish hold from the Fed. Four officials dissented from the decision, including three who objected to language suggesting the Fed could eventually resume rate cuts. The 8–4 vote split was the first time since 1992 that four policymakers dissented, highlighting the complexity of the current environment amid the energy shock.
In addition to central bank decisions, oil prices have rallied on reports that the US is considering further military action in Iran, reinforcing inflation concerns ahead of the policy announcement.
GBP/USD forecast – technical analysis
GBP/USD recovered from the 1.3150 2026 low, rising out of the falling channel, above the 50 and 200 SMA to a peak of 1.36. From here, the price has eased lower, testing 1.3450 support, last week’s low.
Should sellers take out this support, it exposes the 200 SMA at 1.3415, and below here, the 1.3335 support comes into play ahead of 1.32.
Should the 1.3450 support hold, buyers will look back up towards 1.36, the April high. Above here, 1.37 comes into focus.
DAX falls as oil jumps, and ahead of the ECB rate decision
The DAX is opening lower, falling for a ninth straight day as investors digest the latest developments in the Middle East, monitor earnings, and await the European Central Bank rate decision later today.
Oil prices have climbed on reports that the US is considering additional military action against Iran, fuelling concerns of escalating tensions and prolonged supply disruptions. Stalled US–Iran peace negotiations have weighed on risk sentiment over the past week, with European indices trading at three-week lows. Oil prices jumped by as much as 7% to $115 per barrel on the news.
Banks, financials, and energy-sensitive sectors, including travel and tourism, are under pressure.
On the earnings front, Volkswagen is down 0.3% following weaker-than-expected Q1 profits, while Porsche AG is down 0.5% after reporting a drop in revenue and reaffirming its full-year guidance.
Markets are also digesting mixed earnings from US tech overnight. Alphabet and Amazon supported the AI trade, while Meta Platforms unsettled investors after ramping up spending plans, sending its shares around 5% lower in premarket trading.
Alphabet reported Q1 revenue of $109.9 billion, beating forecasts, with Google Cloud revenue rising 63% to $20 billion. Amazon also delivered strong results, with AWS revenue up 28% to $37.6 billion. Microsoft delivered steady results without major surprises.
However, Meta weighed on sentiment after raising its 2026 capital expenditure guidance to $125–145 billion, up from a previous range of $115–135 billion.
Attention now turns to the ECB rate decision. The central bank is widely expected to leave rates unchanged at 2%, although President Christine Lagarde could hint at a potential rate hike in June. A hawkish hold could pull the DAX lower.
DAX forecast - technical analysis
The DAX’s recovery from 21,860, the 2026 low, ran into resistance at 24,800 and rebounded lower, breaking below the multi-month rising trendline and the 200 SMA. The price is testing the 50 SMA at 23,780.
Should sellers take out the 50 SMA support, this opens the door to 23,400 horizontal support ahead of 23,000 the round number.
Should the 50 SMA hold buyers will look to rise above the 200 SMA at 24,100 and 24,300 horizontal resistance. Above here, 24,800, the April high comes into focus.
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