GBP/USD drops below 1.21 for first time since Jan. 2017, eyes on BoE

The bearish pressure surrounding the GBP/USD pair remains intact on Thursday ahead of the Bank of England's monetary policy announcements. As of writing, the pair was trading at its lowest level in more than 30 months at 1.2088, erasing 0.57% daily.

The dollar continues to outperform rivals

The broad USD strength today seems to be driving the pair's action. Although the Federal Reserve yesterday lowered its policy rate by 25 basis points as expected, Chairman Powell implied the rate cut was decision was not seen as the beginning of a "lengthy cutting cycle" and provided a boost to the Greenback. After posting its highest daily close in more than two years at 98.57, the US Dollar Index pushed higher today and is now adding 0.35% on the day at 98.90.

Earlier today, the IHS Markit/CIPS’ Manufacturing PMI came in at 48 in July as expected. Commenting on the data, “A killer combination of economic uncertainty and the weakest production levels for seven years, battered the manufacturing sector into contraction for the third consecutive month in July,” Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply (CIPS), said. 

Eyes on Bank of England

In the next hour, the Bank of England will announce its interest rate decision, which is expected to remain unchanged at 0.75%, and publish its monetary policy. Governor Carney is scheduled to deliver his remarks on the policy outlook at 11:30 GMT as well. 

Previewing this event, "Our UK economists wrote that although they expect the MPC will vote to keep Bank Rate on hold, they think that they will drop their tightening bias, “with the MPC becoming more sensitive to a deteriorating economic outlook vis-à-vis the ongoing trade wars and an increasing risk of a no deal Brexit.”," said Deutsche Bank analysts.

"Since the MPC’s last meeting of course, sterling has weakened noticeably, although yesterday it was the best-performing G10 currency versus the dollar, trading flat despite broad strength for the greenback.”

Technical levels to watch for