GBP/USD Analysis: Pound Recovers After the Bank of England Decision
Yesterday, the Bank of England published its interest rate decision. According to ForexFactory, the votes were distributed as follows:
rate hike - 0 votes, cut - 2 votes, unchanged - 7 (0 - 2 - 7);
forecast: 0 - 0 - 9;
previous values: 0 - 1 - 8.
For the first time in the current cycle of interest rate hikes aimed at inflation lowering, two members of the Monetary Policy Committee voted in favour of the rate cut. The dovish tone was echoed by Bank of England Governor Andrew Bailey: It is likely that we will need to cut the bank rate over coming quarters, possibly more so than is currently priced into markets.
The market's first reaction to the clear signals of the imminent easing monetary policy was the weakening of the pound, including against the US dollar. Thus, yesterday, the GBP/USD rate dropped below the low of April 26 at around 1.245.
However:
the US dollar is also affected by the prospect of the Fed's easing monetary policy because the current tight policy puts pressure on the labour market - according to data from May 9, the number of applications for unemployment benefits in the US was the highest since November 2023;
Today's UK GDP data (which turned out to be better than expected) supported the pound.
As a result, today, the GBP/USD rate surged to 1.2537 from yesterday's low below 1.2450.
Technical analysis of the GBP/USD chart shows that:
the price is within the channel (shown in blue);
the median line (as shown by the arrow) acts as resistance - a long upper shadow can be interpreted as evidence of sellers' activity above 1.26;
recent events have shown the presence of demand in the area of the psychological level of 1.25.
Thus, fluctuations in the GBP/USD rate may continue to compress within the formation between the trendline resistance (shown in red) and support around 1.25. The exit from this consolidation pattern may develop into a stable trend against the background of prospects for lowering interest rates by central banks.
Read more: https://fxopen.com/blog/en/oa-gbp-usd-analysis-pound-recovers-after-the-bank-of-england-decision/
Text source: Forex Trading Blog
