Recent comments from BoE officials have further heightened uncertainty regarding the policy outlook. Chief Economist Huw Pill stated on Tuesday that the economic impact of the ongoing Middle East conflict should not be used as an excuse for inaction on inflation. Having previously suggested that the BoE had cut rates too quickly over the past year, Pill noted he "stands ready to act against inflationary pressures." He emphasized that upside risks to price stability are increasing due to the evolving situation in the Gulf region. Last week, the BoE revised its inflation forecast upward, predicting the rate will surge to 3.5% by mid-year. This marks a significant reversal from the previous projection of returning to the 2% target by April. In last week's meeting minutes, Pill expressed uncertainty over whether rising market borrowing costs were sufficient to offset the inflationary impact of higher energy prices, reiterating that action would be taken if inflation accelerates. Financial markets currently price in nearly three 25-basis-point rate hikes by the BoE this year, a stark contrast to the rate cut trajectory anticipated before the conflict. However, some economists argue that growth headwinds and a softening domestic labor market may ultimately lead the central bank to hold rates steady. Last week, BoE Governor Andrew Bailey explained that investors betting on rate hikes might be moving too fast. 

From a daily chart perspective, GBP/USD is oscillating near the Bollinger Middle Band and the EMA 50. The formation of two large bullish candles sandwiching a small bearish one signals a potential upward move. Resistance levels are identified at the psychological round number and the Bollinger Upper Band, specifically at 1.350 and 1.355. With the Bollinger Bands beginning to narrow and moving averages flattening, a trend reversal could occur at any time. The MACD has formed a golden cross, and both lines are retracing toward the 0-line. Given the current distance, the rebound appears incomplete. The RSI reads 49, indicating a wait-and-see sentiment among investors. Based on the 4-hour chart, the Bollinger Bands are narrowing and moving averages are flat, with price consolidating around the EMA 12. In the short term, the rebound seems unfinished, with a high probability of testing the Bollinger Upper Band. The RSI on this timeframe is 56, reflecting cautious market sentiment. The recommended strategy is to buy the dips.

Trading direction: Buy

Entry Price: 1.34

Target Price: 1.37

Stop Loss: 1.32

Support: 1.32/1.3/1.28

Resistance: 1.35/1.38/1.41