GBP/USD witnessed aggressive selling on Thursday in reaction to the BoE’s dovish outlook.Resurgent USD demand aggravated the bearish pressure and also contributed to the slide.
Acceptance below the 1.2400 mark would now be seen as a fresh trigger for bearish traders.The GBP/USD pair weakened further below the 1.2400 mark and touched its lowest level since July 2020 in reaction to the Bank of England’s dovish outlook.
As was widely anticipated, the UK central bank lifted its key interest rate for the fourth time in the current tightening cycle to curb inflation. The vote distribution indicated that three MPC members were in favour of raising interest rates by 50 bps. Moreover, the BoE, in the accompanying policy statement, noted that some degree of further tightening in monetary policy may still be appropriate in the coming months.
That said, two MPC members judged rate guidance as inappropriate considering that risks to growth and inflation are more balanced. Adding to this, the BoE warned about a sharp slowdown and is forecasting the UK economy to contract by 0.25% in 2023. A divided MPC, along with downside growth risks, suggests that the rate hike cycle could be nearing a pause, which, in turn, prompted aggressive selling around the British pound.
GBP/USD drops to fresh 22-month low below 1.2400.GBP/USD stays under constant bearish pressure and trades at its lowest level since July 2020 below 1.2400. Despite the Bank of England’s decision to hike the policy rate by 25 basis points, Governor Bailey’s cautious comments weigh heavily on the British pound.
EUR/USD falls to 1.0550 area on renewed dollar strength.EUR/USD started to edge lower toward 1.0550 during the European trading hours on Thursday amid renewed dollar strength. The sharp decline witnessed in GBP/USD pair suggests that the dollar captures the outflow out of the pound on the BOE announcements.
Gold climbs above $1,900 despite renewed dollar strength.Gold preserves its bullish momentum and trades at a fresh six-day high above $1,900 on Thursday. Although the US Dollar Index continues to push higher, the modest retreat witnessed in the benchmark 10-year US T-bond yield supports XAU/USD.