• The Bank of England increased its key interest rate to its highest since 2008.
  • BoE Governor Bailey said that there was no evidence that inflation had peaked.
  • The future for the UK economy is still quite bleak.

Today’s GBP/USD price analysis is bearish. On Thursday, the Bank of England increased its key interest rate to its highest level since 2008 and indicated that rates were approaching their peak. As a result, the British pound decreased against the dollar.

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Investors and economists mostly anticipated the BoE’s decision to raise its interest rate by 50 bps to 4.00%, which was approved by a vote of 7-2.

In a speech delivered after the rate increase, BoE Governor Andrew Bailey remarked that there was no evidence that inflation has turned the corner since the November monetary policy report.

Following the announcement of the decision, the pound gained strength. Some had anticipated the central bank to reduce the rate hike to 25 basis points. However, the sterling rapidly turned around and touched session lows.

According to Piotr Matys, senior FX analyst at InTouch Capital Markets, the future for the UK economy is still quite bleak compared to the eurozone and the US, which is why GBP, after a knee-jerk reaction, resumed its drop.

The BoE is attempting to mitigate the risks from an inflation rate significantly higher than its target. This is similar to other central banks like the Fed and the European Central Bank, which hiked rates on Wednesday and Thursday.

However, it is also concerned about escalating what is anticipated to be this year’s worst recession among major rich economies.

GBP/USD key events today

Investors will be keen on PMI data from the United States and the UK and the US jobs report. The nonfarm payrolls will likely cause a lot of volatility as it will show whether the US labor market is cooling.

GBP/USD technical price analysis: Bears win the battle for control

GBP/USD technical price analysis

The 4-hour chart shows GBP/USD trading far below the 30-SMA after breaking out of the 1.2274-1.2425 range. The RSI also supports bearish momentum as it trades below the 50-line. 

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The price oscillated between the 1.2274 support and the 1.2425 resistance for some time before bears were finally strong enough to break below the support. Currently, the price is falling toward the next support level at 1.2150.

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Source: https://www.forexcrunch.com/gbp-usd-price-analysis-boes-dovish-hike-pushes-down-sterling/