• GBP/USD is continuing its modest climb higher that began a fortnight ago, and could hit the psychologically important 1.40 level soon.
• This is however dependent on the Bank of England’s monetary policy committee sounding hawkish as it announces its latest decisions on Thursday.

GBP/USD WAITING TO BANK OF ENGLAND

GBP/USD continues to advance modestly, extending the rise that began on July 20 when the pair hit a recent low at 1.3572. The clear near-term target remains the psychologically-important 1.40 level, and Thursday's announcements by the Bank of England's monetary policy committee could prove to be the catalyst for that level to be reached and perhaps breached.

The MPC will report on its monetary policy and the main focus will be on whether or not it gives away any indications that tightening might be coming. This could come in the form of a reduction in asset purchases, or through higher UK interest rates. It will not change its settings tomorrow, but it may warn the markets that a tapering off its assistance program could be in the works - which would be a positive for GBP/USD.

The downside is that if the BoE ignores stronger UK inflation or economic growth, support is available at 1.3840 from a downward sloping trendline (see chart above) which previously served as resistance but is now supporting the price.

As for the US Dollar, that side of the equation is also relatively stable Wednesday, with traders waiting for Friday's US labor-market report. The financial news agencies polled forecasters and predicted a rise of 880,000 non-farm payrolls for July. This is up from the 850,000 in July.