When is the Bank of England (BoE) interest rate decision and how could it affect GBP/USD?

BoE Monetary Policy Decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 11:00 GMT. The UK central bank is expected to hike interest rates by another 25 bps, marking the 12th consecutive lift-off amid the persistent rise in UK consumer inflation. Apart from this, investors will focus on the accompanying monetary policy statement, which provides the Monetary Policy Committee's (MPC) economic and inflation projections. This will be followed by the post-meeting press conference at 11:30 GMT, where Governor Andrew Bailey's comments will be closely scrutinized for clues about the policy outlook.

According to Matías Salord, Senior Analyst at FXStreet, high expectations from the market might mean that a surprise on the dovish side could be on the cards: “The expected hawkish tone should strengthen the currency. However, some of this is already factored into the market, so if the Bank of England (BoE) adopts a more dovish stance, the Pound could face downward pressure.”

Analysts at Nomura offer a brief preview and write: “We expect the BoE to raise rates by 25 bps. While we see the risks to our central view as tilted towards zero rather than 50 bps (especially with renewed banking concerns), we think the chances of something other than a 25 bps hike are low. This is a MPR meeting, and we expect the Bank to remove much if not all, of the recession that it had been expecting previously. The Bank’s end-horizon inflation forecasts still look very low, and we would not be surprised – especially with core inflation looking sticky and with stronger GDP forecasts – if the Bank was to raise its expectations. We see the Bank raising rates again by 25 bps in June for a peak of 4.75%. Thereafter, we see rate cuts from the second half of 2024 to take rates back down to 3.50% by early 2025.”

How could it affect GBP/USD?

Heading into the key central bank event risk, the GBP/USD comes under heavy selling pressure on Thursday and retreats further from a fresh one-year high touched the previous day amid resurgent US Dollar (USD) demand. A dovish BoE tilt, though unlikely, could exert additional downward pressure on the British Pound and set the stage for some meaningful corrective pullback for the major.

Conversely, the market reaction to a 25 bps and (or) a neutral stance might fail to impress bulls. That said, expectations that the Federal Reserve (Fed) is nearing the end of its year-long rate-hiking cycle could keep a lid on the Greenback and lend some support to the GBP/USD pair. This, in turn, suggests that traders might prefer to wait for the release of the UK GDP report on Friday before placing fresh directional bets.

Eren Sengezer, European Session Lead Analyst at FXStreet, outlines important technical levels to trade the major and writes: “GBP/USD trades near the lower limit of the ascending regression channel, which is currently located at 1.2570. The 50-period Simple Moving Average (SMA) reinforces that support as well. In case the pair confirms that level as resistance, 1.2520 (100-period SMA) aligns as the next bearish target before 1.2500 (psychological level, static level) and 1.2460 (200-period SMA).”

“On the upside, 1.2600 (static level) forms interim resistance before 1.2650 (mid-point of the ascending regression channel). A four-hour close above the latter could attract buyers and fuel another leg higher toward 1.2700,” Eren adds further.

Key Notes

  •  Bank of England Preview: Bailey to break Pound's rally with reluctance to raise rates further

  •  Bank of England Preview: A risk event for the GBP/USD rally

  •  GBP/USD Forecast: Buyers shy away, eyes on BoE policy decisions

About the BoE interest rate decision

The BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it will be positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it will be seen as negative, or bearish.