Yesterday the GBP to USD rate jumped around 100 pips higher after the FED, but it wasn’t over for GBP/USD with the BOE holding its meeting today. This pair closed the day around 1.28, while today the price action was the opposite of yesterday despite the UK Services and Manufacturing this morning.

GBP/USD Daily Chart – Bearish Engulfing Candlestick Today

The probability of a June rate decrease by the Bank of England (BOE) is increasingly seen as the base case, with the market-implied probability rising to 75% today from 60% after the BOE’s decision. Market expectations now suggest a reduction of 70 basis points by the end of the year.

BOE Gov Andrew Bailey indicated that although the BOE is not yet prepared to lower rates, trends are pointing in that direction, which is as bearish as it can get for the GBP. He also acknowledged that it is acceptable for markets to anticipate rate cuts this year. The shift in sentiment, coupled with increased bids for the US dollar, has led to a weakening of GBP/USD, which has lost around 150 pips, exceeding yesterday’s 120 gain.

This has resulted in a bearish engulfing candlestick on the daily chart, indicating a reversal of previous positive momentum. The pair is currently trading at its lowest level since the beginning of this month, suggesting that the recent breakthrough may have been invalidated.

Bank of England March 22 Policy Decision

• BOE leaves bank rate unchanged at 5.25% as expected
• Prior rates were 5.25%
• Bank rate vote 8-0-1 vs 7-1-1 expected (Dhingra voted to cut rates by 25 bps)
• Moving in the right direction but not yet at the point to cut interest rates
• Inflation has continued to fall back relatively sharply
• Restrictive monetary policy stance is weighing on activity in the real economy
• That is leading to a looser labour market and is bearing down on inflation pressures
• But key indicators of inflation persistence remain elevated
• Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target
• Prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably
• Will keep under review for how long Bank Rate should be maintained at its current level
• Full statement

GBP/USD Live Chart