The Bank of England (BoE) is currently meeting to decide on whether or not to adjust interest rates tomorrow, putting the GBPUSD in the spotlight once more. The BoE cut interest rates to a record low of 0.1% last week; the second rate cut this month. This move has put the GBPUSD under a situation of intense volatility, with the pair emerging as the most volatile currency major for the week. Today, the pair has moved nearly 500 pips in two directions: approximately 220 pips up and a corresponding 300 pips to the south.
So what can we expect from the Bank of England tomorrow with regards to interest rates, and what are the implications for the GBPUSD?
The first release is the MPC vote for the latest meeting. Coming from a 0-9-0 vote pattern (increase-decrease-hold) in the last session, the consensus for the voting pattern is a 0-0-9 vote. There is also the rate decision proper, which economists are expecting will be a “hold” at the current rate of 0.10%. The monetary policy summary is a discussion which centres on the projections for the UK economy and may contain clues about possible future rate adjustments.
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Technical Outlook for the GBPUSD
The pair has seen a most volatile day with the GBPUSD gaining, losing and then regaining lost ground to trade around the 1.18354 price level. The “W” harmonic pattern on the 4-hour chart awaits resolution.
The critical resistance can be found at the 1.18810 price level. If the BoE releases a monetary policy statement that includes more measures that expand asset purchases, we may see a weakening and then a strengthening of the GBPUSD. A break above1.18353 targets 1.20005, with the 1.21761 resistance located further ahead.
A downside break of 1.17976 sets the reversal move from point D of the harmonic pattern on its way. This move could then target 1.17389 or quite possibly the 1.16654 price levels, all acting as support. Supporting this move could be a rate cut or a monetary policy vote that features some members voting for further rate cuts.
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