Total political and economic chaos has caused a rift in the Bank of England as never before in history. One government cuts taxes, the other raises them. On all sides they scream about a prolonged recession, but the latest statistics are pleasing to the eye. How can MPC members not doubt their decisions? Although the futures market expects the BoE to raise the repo rate by 50 bps, to 3.5%, the highest level in 14 years, the verdict is still out. And that fact is keeping the GBPUSD in suspense.

Never in the history of the Bank of England has there been a case where there were four different opinions in a final rate decision. BofA now predicts that two members of the MPC will vote to keep it unchanged, five for a 50 bps increase, and two more for 75 bps. If someone appears who considers a quarter of a point to be the best option, there will be a split of the four sides. It is curious that in fact it can support the GBPUSD. The uncertainty in monetary policy will be interpreted by the markets as better than a slowdown by the Fed.

Dynamics of central bank rates

Proponents of a slowdown in monetary tightening within the Bank of England nod to stabilizing inflation expectations, the delayed effect of an increase in the repo rate on the economy and signs of a cooling labor market. Their opponents point to a run-up in consumer prices to 11.1%, more than five times the 2% target. If inflation is not stopped in time, the economy will get even worse.

Dynamics of British inflation

The BOE's decision will be very difficult unless, of course, a busy economic calendar helps. Or complicate matters. The releases of GDP, unemployment and employment data, as well as Uk's inflation, in case of pleasant surprises, may push the Bank of England to a broad move of 75 bps, which will definitely support the pound.

There are always two currencies in any pair, so the meeting of the UK central bank and a lot of important data on the calendar are far from all that makes those working with GBPUSD nervous. The Fed will make its verdict on the federal funds rate. At the same time, FOMC forecasts will be updated, and a day after that, the most important statistics on US inflation for November, to which financial markets react violently this year, will be released. The S&P 500 has seen the most swings of 3% or more in response to CPI data since 2009.

Thus, GBPUSD is going to be turbulent. The good news is that after that, its outlook will become clear than it is now. However, it will not be easy to survive in the conditions of the increased volatility on Forex.

Technically, the fall of the analyzed pair below 1.2115 is a reason for selling as part of the implementation of the 1-2-3 reversal pattern, followed by a transition to buying on the rebound from the supports 1.205, 1.199, 1.187. On the contrary, the growth of EURUSD above 1.2325 is a signal for the formation of long positions, followed by a reversal in case of an unsuccessful assault on resistance at 1.2425 and 1.2535.