When is the BoE monetary policy 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 widely expected to keep interest rates on hold at 0.1% as it approaches the end-of-year target of £150 billion in asset purchases. Some investors expect officials to slow the pace of buying so that the program stretches to the end of the year instead of ending abruptly in November. Apart from this, investors will also be more interested in the tone of the statement amid expectations for a tighter monetary policy next year.

Analysts at Danske Bank offered their take on the BoE meeting and explained: “We do not expect much news from the BoE as it is one of the interim meetings. That said, the combination of high inflation and payroll employment now above pre-covid levels (although total employment remains subdued) means that risks are tilted towards a more hawkish BoE. QE is set to end by the end of the year and the question is whether the ‘Old Lady’ will hike as early as in spring next year.”

How could it affect GBP/USD?

Ahead of the key event risk, the emergence of some selling around the US dollar assisted the GBP/USD pair to stage a solid rebound from the 1.3600 mark. Given the disagreement among MPC members, a higher number of dissenters could spur demand for the British pound and allow the pair to build on the recovery from the post-FOMC swing lows. In the unlikely occurrence of a more dovish shift, the near-term bias could shift in favour of bearish traders.

Meanwhile, FXStreet's own Chief Analyst, Valeria Bednarik, offered a brief technical outlook for the major and outlined important technical levels: “From a technical point of view, bears are in control of the pair, which trades well below the 61.8% retracement of the August/September rally at 1.3720. As long as GBP/USD remains below it, bears will hold the grip. A hawkish stance from UK policymakers may boost the pair toward the level, but unless there are clear indications of tapering before year-end, sellers would likely add near it. A non-expected dovish stance will probably send the pair below the 1.3600 level, with the next relevant support level and possible bearish target at 1.3520.”

Key Notes

  •  Bank of England Preview: Action to revolve around tapering prospects

  •  BoE Preview: Forecasts from 10 major banks, looking for clues on tapering timing

  •  GBP/USD Price Analysis: Defending critical daily support line ahead of BOE

About the BoE interest rate decision

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 is 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 is seen as negative, or bearish.