GBP/USD Forecast: Pound could attack 1.2200 on a hawkish BOE surprise

• GBP/USD has lost its bullish momentum following Wednesday's rally.
• The Bank of England is widely expected to hike its policy rate by 25 basis points.
• Investors will pay close attention to vote split since there won't be a press conference.

GBP/USD has gone into a consolidation phase after having gained nearly 200 pips on Wednesday. The British pound's fate depends on the Bank of England's policy decisions and the pair could test 1.2200 if there is a hawkish surprise.

Since there won't be a press conference after the BOE announces its interest rate decision and releases its Monetary Policy Summary, the vote split could trigger a significant reaction.

Markets expect the bank to hike its policy rate by 25 basis points (bps) to 1.25% in June. In case the vote is unanimous on such a rate increase, this could be seen as a dovish development and cause the British pound to suffer losses against its rivals. If the press release unveils that three or four policymakers have voted for a 50 bps hike, the initial reaction is likely to fuel a leg higher in GBP/USD. A surprise 50 bps hike should also boost the sterling.

Market participants will also pay close attention to the policy statement. Earlier in the week, the data from the UK showed that the economy contracted in April and that the unemployment rate edged slightly higher in the three months to April. The BOE could acknowledge the worsening economic outlook and refrain from committing to further aggressive tightening moves in the future. In that scenario, GBP/USD is likely to come under renewed bearish pressure even if the vote split were to point to a hawkish rate outlook.

Previewing the BOE event, "the BOE is unfortunate to hold its rate decision a day after a dramatic Fed announcement and following an emergency meeting by the European Central Bank," noted FXStreet Analyst Yohay Elam. "It is hard to see how a hawkish surprise could lift sterling."

BOE Preview: Why GBP/USD set to suffer even in response to a 50 bps hike, a lose-lose event.

GBP/USD Technical Analysis

The pair was last seen trading near 1.2120, where the 20-period SMA on the four-hour chart and the Fibonacci 23.6% retracement of the latest downtrend align. In case this support fails, additional losses toward 1.2050 (static level) and 1.2000 (psychological level) could be witnessed. Meanwhile, the Relates Strength Index (RSI) indicator on the same chart stays below 50 despite Wednesday's rebound, suggesting that buyers remain hesitant to commit additional gains in the near term.

On the upside, stiff resistance is located at 1.2200 (Fibonacci 38.2% retracement). A four-hour close above that level could be seen as a bullish development and open the door for an extended rebound toward 12300 (Fibonacci 50% retracement) and 1.2350 (50-period SMA).