The Bank of England (BoE) surprised markets by keeping interest rates unchanged, causing the pound (GBP) to drop below 1.2250. The BoE's policy statement was somewhat hawkish, but the Monetary Policy Committee (MPC) was divided.
This suggests future policy decisions could be close calls, especially if inflation remains high. GBP may struggle against the US dollar, which has a hawkish Federal Reserve.
The BoE's decision not to hike rates was due to caution about the UK's weak economic performance. Although they believe monetary policy is sufficiently restrictive to curb inflation, they expect a near-term drop in the Consumer Price Index (CPI).
The BoE left room for rate hikes if needed but committed to keeping policy restrictive until inflation returns to the 2% target. The decision was split 4-5, with a unanimous vote to reduce UK government bond purchases.
Market focus now turns to economic data, and if the US outperforms the UK, GBP/USD could face continued pressure due to the divergence in central bank policies. The US dollar remains bullish unless there is a significant softening in US economic data.
On the technical perspective, both MACD and RSI are showing SELL signs as well, which is further confirmation that the price of GBP will probably continue to fall compared to USD.
If the current trend continues, the price might fall to levels of 1.2219. As a pivot point might be considered 1.2366, from where the bulls might start entering and the price to rise to 1.2491
Risk Disclosure: Trading Foreign Exchange (Forex) and Contracts of Difference (CFD's) carries a high level of risk. By registering and signing up, any client affirms their understanding of their own personal accountability for all transactions performed within their account and recognizes the risks associated with trading on such markets and on such sites. Furthermore, one understands that the company carries zero influence over transactions, markets, and trading signals, therefore, cannot be held liable nor guarantee any profits or losses.
This suggests future policy decisions could be close calls, especially if inflation remains high. GBP may struggle against the US dollar, which has a hawkish Federal Reserve.
The BoE's decision not to hike rates was due to caution about the UK's weak economic performance. Although they believe monetary policy is sufficiently restrictive to curb inflation, they expect a near-term drop in the Consumer Price Index (CPI).
The BoE left room for rate hikes if needed but committed to keeping policy restrictive until inflation returns to the 2% target. The decision was split 4-5, with a unanimous vote to reduce UK government bond purchases.
Market focus now turns to economic data, and if the US outperforms the UK, GBP/USD could face continued pressure due to the divergence in central bank policies. The US dollar remains bullish unless there is a significant softening in US economic data.
On the technical perspective, both MACD and RSI are showing SELL signs as well, which is further confirmation that the price of GBP will probably continue to fall compared to USD.
If the current trend continues, the price might fall to levels of 1.2219. As a pivot point might be considered 1.2366, from where the bulls might start entering and the price to rise to 1.2491
Risk Disclosure: Trading Foreign Exchange (Forex) and Contracts of Difference (CFD's) carries a high level of risk. By registering and signing up, any client affirms their understanding of their own personal accountability for all transactions performed within their account and recognizes the risks associated with trading on such markets and on such sites. Furthermore, one understands that the company carries zero influence over transactions, markets, and trading signals, therefore, cannot be held liable nor guarantee any profits or losses.