The GBP/USD pair, which started the day a couple of pips above the 1.32 handle, added 200 pips on Thursday on its way to a fresh yearly peak at 1.3405. As of writing, the pair was trading at 1.3392, adding 1.4% on the day.
Earlier in the day, the Bank of England decided to leave the rates unchanged with a 7-2 vote. The minutes showed that the bank was now seeing it appropriate to withdraw some stimulus in the coming months. Although there was no press conference today, the BoE Governor Mark Carney commented on their decision in an interview, saying that in order to return inflation to the 2% target rate in a sustainable manner, they may need to do some adjustments in interest rates in coming months.
The GBP is also gathering strength against the euro, suggesting that the cable's upsurge is a product of the GBP strength rather than a USD weakness. In fact, the US Dollar Index, which spiked to a fresh weekly high at 92.66 on the back of higher-than-expected consumer inflation growth in the U.S., is flat on the day at 92.35.
Despite today's upsurge, Viraj Patel, Foreign Exchange Strategist at ING, argues, "a 'withdrawal of stimulus' may only offer GBP a one-time boost, with the narrative quickly shifting back to Brexit over the coming weeks."
Technical outlook
The RSI indicator on the daily graph rose to 73, showing overbought conditions for the pair. 1.3300 (psychological level) could be seen as the first target in case a technical correction starts. Below that level, 1.3190 (Sep. 13 low) and 1.3100 (psychological level/Sep. 8 low) could act as technical supports. On the upside, a daily close above the 1.3400 (daily high) could open the door for further gains towards 1.3500 (psychological level) and 1.3535 (Jun. 29 high).
Today's data from the U.S.:
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