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BoE Holds but Split About Policy Direction

The Bank of England voted to hold rates at 0.50% for 6 years now, since first cutting it to this historic low in March 2009. The vote was unanimous, but votes for what monetary policy should be later this year is split. While some voting members believe that the BoE should raise rates at the end of the year, others believe that the BoE will likely be dovish. The market is left uncertain about whether the BoE intends to raise or cut rates after this 6-year hold. Until there are more signs that the BoE is becoming hawkish, or at least fewer signs that it will be dovish, the pound should be pressured against the USD, because the FOMC is clear on its intent to raise rates this year.

GBP/USD 4H Chart 3/5
(click to enlarge)

The GBP/USD therefore should be pressured. The 4H chart shows that cable was already putting in a price top ahead of the BoE risk. After the monetary statement, there was a bit of a shake, but the market remains bearish. Now, if there is a pullback because cable is oversold in the intra-session time-frame, we should watch for resistance around 1.5350, which was a support/resistance pivot area.

If price holds below this key area, that means the bears are in control, and there would be pressure towards the low on the year around 1.4950-1.50. A break above 1.54 however might revive the bullish outlook, especially if cable was able to hold above 1.52. This would put pressure on the 1.5550 high, with risk of extending to 1.56.