GBP/USD rebounds swiftly from its lowest level since 1985, retakes 1.1300 ahead of BoE

The GBP/USD pair attracts some buying in the vicinity of the 1.1200 mark and rebounds from its lowest level since 1985 touched during the early European session this Thursday. The pair is currently trading near the daily high, just below the 1.1300 mark, though any meaningful recovery seems elusive as the focus remains on the crucial Bank of England policy decision.

Heading into the key central bank event risk, some repositioning trade turns out to be a key factor offering support to the GBP/USD pair. Apart from this, the intraday uptick could further be attributed to some cross-driven strength stemming from a dovish Bank of Japan-inspired rally in the GBP/JPY cross. Furthermore, a modest US dollar pullback from a new 20-year peak remains supportive of the modest recovery move.

The USD downtick, meanwhile, lacks any obvious fundamental catalyst and is likely to remain limited amid a more hawkish stance adopted by the Federal Reserve. In fact, the Fed raised interest rates by another 75 bps on Wednesday and signalled more aggressive rate increases at its upcoming meetings. This, along with the prevalent risk-off mood, should act as a tailwind for the safe-haven buck and cap the GBP/USD pair.

Traders might also prefer to move to the sidelines and wait for the BoE monetary policy update before placing aggressive bets. The UK central bank is expected to step up its efforts to curb inflation and deliver a supersized 75 bps rate increase on Thursday. Investors will also look to the accompanying policy statement for clues about future rate hikes amid growing recession risks, which will influence the British pound.

Technical levels to watch