GBP/USD licks its wounds at 1.3500 after plummeting 200 pips on dovish BoE
|- GBP/USD hovers around 1.3500 after the Bank of England decided to keep rates unchanged.
- US and UK central banks push back higher rates, thus propelling equity markets to all-time new highs.
- GBP/USD: As long as it remains below 1.3571, sellers are in control.
The GBP/USD is steady as the Asian Pacific session kicks in, up 0.04%, trading at 1.3503 during the day at the time of writing. The market sentiment is upbeat, as the Federal Reserve said it would begin the bond tapering process, reducing purchases by $15 billion in the middle of November while pushing back higher interest rates. Investors used that as a signal to keep pushing equities at all-time highs, while in the FX market risk-sensitive currencies, dropped against the buck.
Meanwhile, on Thursday, the Bank of England (BoE) Monetary Policy Committee (MPC) decided to keep rates at 0.10%, despite that some BoE policymakers, including Governor Andrew Bailey, expressed concerns about high inflation in weeks before the meeting.
According to the MPC statement, the BoE rationale to maintain rates unchanged is that “It will be necessary to raise bank rate over coming months if data, especially jobs, is in line with the forecast.” Furthermore, they added that the “MPC still sees value in waiting for official labour market data after end of furlough, before deciding on tightening policy.”
Regarding asset purchases, the bank stayed put at 895 billion of Sterling. Concerning high inflation levels, the Boe “forecasts inflation to peak of 4.80% in Q2 2022.” Moreover, the UK’s central bank forecasts show inflation in two years at 2.23%, based on market interest rates.
GBP/USD Price Forecast: Technical outlook
In the daily chart, the GBP/USD pair found resistance around 1.3500, but as long as it remains below the July 20 low at 1.3571, it would be vulnerable to British pound sellers. Additionally, the daily moving averages (DMA’s) are well above the spot price, with a bearish slope, so GBP/USD traders would expect some selling pressure mounting on the pair ahead of the US Nonfarm payrolls report.
If GBP/USD bulls reclaim 1.3571, an attack to the 1.3600 figure is on the cards. On the other hand, failure at the abovementioned would expose the 1.3500 psychological level, followed by the 2021 low at 1.3411.
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