Today’s Bank of England (BOE) Monetary Policy Rate decision was arguably one of the most suspenseful interest rate decisions in recent years. This is why it was no surprise to see a surge in volatility on GBPUSD following the central bank’s decision to keep rates steady. Heading into today’s rate decision, market participants were split on whether or not Mark Carney would announce a rate cut in his last statement as BOE Governor.
The key takeway from today’s statement is that the central bank will be prioritizing to bring inflation back to its 2% target. To some degree, the BOE will also keeping track of economic data. If CPI or economic reports deteriorate, they have warned that they will not hesitate to cut rates. This means that inflation reports in the coming months will be closely watched by market participants.
It would also seem that not everyone on the MPC were convinced that easing was warranted at this point. Ahead of the rate decision, it was expected that three members would vote for a rate cut and six would want to keep them steady. However, it turned out that the voter turnout still remained at 2-7. Consequently, this pushed GBPUSD higher.
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GBPUSD Outlook
On the daily time frame, we can see that the trend line (from connecting the lows of December 24, January 14, and January 20). If there are enough buyers in the market for today’s candlestick to close as a bullish candle, it could suggest that GBPUSD may soon rally. It could reach up to 1.3150 if the pound can sustain its strength.
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On the 4-hour time frame, we can see that the currency pair is now testing resistance at the 100 SMA and 200 SMA. The area around 1.3080 is the first test for GBPUSD. Failure to close above this level could mean that GBPUSD may resume its drop to its recent lows at 1.2970.More content
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