GBP/USD: Weigh by vote split – OCBC

The Pound Sterling (GBP) fell on surprise BoE vote split even as BoE keeps policy rate on hold at 4.75%. MPC voted 6-3 to keep rates on hold. Deputy Governor Dave Ramsden, Swati Dhingra and Alan Taylor all voted to cut by 25bp. The GBP/USD was last seen at 1.2506. OCBC’s FX analysts Christopher Wong notes.

Risks are skewed to the downside

“Markets were only expecting Dhingra to vote for a cut. BoE staff also downgraded their economic forecast for 4Q 2024, now predicting no growth, compared with the 0.3% expansion projected in its Nov report. Taken together, dovish split and downgrade in growth assessment was a negative for GBP. Accompanying policy saw little changes from previous, while still noting that policy would need to be ‘restrictive for sufficiently long.’”

“On inflation, MPC mentioned continued progress in disinflation but warned that ‘remaining domestic inflationary pressures are resolving more slowly.’ In written comments to reporters, Governor Bailey said that ‘we think a gradual approach to rate cuts remains right, but with the heightened uncertainty in the economy we can't commit to when or by how much we will cut rates in the coming year’.

“GBP fell amid dovish hold outcome and stronger USD. Daily momentum turned bearish while RSI fell. Risks are skewed to the downside. Support at 1.2450, 1.2410 levels. Break puts 1.23 (2024 low) in focus. Resistance at 1.2570 (76.4% fibo retracement of 2024 low to high), 1.2660 levels (21 DMA).”