The Bank of England's outlook and inflation projections will be key for sterling at Thursday's policy review.
If they inspire confidence, the pound will rise - if not, the primary downtrend should resume.
The BoE is in a difficult position, as inflation surges while the economy faces strong headwinds nL5N2WW63C. BOEWATCH shows a quarter-point rate hike to 1.00% fully priced for Thursday.
The BoE has toned down its hawkish rhetoric in recent weeks, and is set to steer a difficult course between inflation and recession nL5N2WO38Z. A Reuters poll last week showedeconomists believe the cost of living crisis will have a severe impact on Britain's economic growth, with no strong consensus on the future rate path nL5N2WN29J.
GBP/USD bounced 1.1% Wednesday, resulting in a bullish outside day, as risk appetite surged and the U.S. dollar fell broadly in response to the Federal Reserve disappointing the hawks by ruling out 75-basis-point rate hikes nL2N2WW1W8.
The strong close left daily momentum studies basing as the five-day moving average climbs, while Thursday's open above the 1.2597 10 DMA was positive.
The negatives are led by falling 10 and 21 daily and weekly moving averages, plus sliding 21-day Bollinger bands.
The mixed signals provide little short-term bias, but the longer-term primary downtrend remains valid while the well-tested 1.2832 21 DMA holds.
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