GBPUSD Analysis Ahead of the Bank of England Decision – 9 May 2024

Sterling is trading cautiously against the U.S. dollar ahead of the Bank of England’s (BoE) policy meeting later today. Market sentiment expects the central bank to hold rates steady at 5.25% but signal when the first interest rate cut in four years may occur as inflation continues to fall.

Key Market Expectations:

  • BoE Rate Decision: Money markets predict a 95% likelihood that the BoE will maintain the current 5.25% rate.
  • Future Cuts: Market participants are closely monitoring for signs of when a rate cut will occur. Current probabilities indicate a 56% chance of a rate cut in June and a 72% likelihood in August.

Analyst Views:
Jim Reid, strategist at Deutsche Bank, notes, “It’s widely anticipated that they’ll leave rates unchanged at 5.25%. The focus will be on the vote split, new forecasts, and guidance on future potential rate cuts.”

GBPUSD Price Movement:

  • Current Price: GBPUSD is currently trading at 1.25507 USD.
  • Recent Trend: The pair rebounded from the 1.2300 lows and is consolidating above 1.2500.
  • Support Levels:
  • 1.25222 USD: Immediate support, based on today’s low.
  • 1.24000 USD: Further support level from recent trading patterns.
  • Resistance Levels:
  • 1.25569 USD: Immediate resistance at today’s high.
  • 1.26000 USD: Further resistance aligns with the 200-day moving average.

Technical Indicators:

  • Moving Averages: GBPUSD is above its 50-day moving average near 1.2500, indicating a short-term bullish trend. However, it remains below the 200-day moving average at 1.2600, which could act as a significant resistance level.
  • RSI (Relative Strength Index): The RSI is around 55, indicating neutral momentum but with potential for further gains.

Price Predictions:

  • Bullish Scenario: If GBPUSD holds above 1.25222, it could test 1.25569 again and rise toward 1.26000.
  • Bearish Scenario: If GBPUSD drops below 1.25222, it may retest support at 1.24000.

Key Market Impacts:

  • Election Pressure: Prime Minister Rishi Sunak is facing election pressure and welcomes potential interest rate cuts, which could aid his economic positioning.
  • BoE Messaging: Investors will scrutinize BoE Governor Andrew Bailey’s forward guidance to assess the likelihood and timing of future rate cuts.

As the BoE prepares for its policy decision, market participants are advised to monitor GBPUSD for potential volatility. Today’s decision and the BoE’s press conference will provide further insights into the timing of the anticipated rate cuts. Keep an eye on global economic trends, particularly the divergence in monetary policy between the BoE and other central banks like the Federal Reserve.