BOE interest rate decision overview
It’s a ‘Super Thursday’ again and time for the Bank of England’s (BOE) second rate hike announcement due at 1200GMT, the first back-to-back lift-off since 2004. The interest rate decision will be accompanied by the release of the Monetary Policy Report (MPR) and the minutes of the policy meeting. Governor Andrew Bailey is scheduled to hold a post-monetary policy decision press conference at 1230GMT.
The BOE is widely expected to raise the benchmark bank rate by 25 bps to 0.50% from 0.25% previous, with an 8-1 voting composition likely in favor of a rate lift-off. Money markets have already priced in a 25 bps rate hike for this month, as Bailey and Co. remain committed to fighting the inflation monster.
The economic indicators continue to back a hawkish move from the BOE, as the “UK Gross Domestic Product surprised with 0.9% growth in November, the unemployment rate dropped to 4.1% in November and inflation exceeded estimates with 5.4% in December,” FXStreet’s Senior Analyst Yohay Elam notes.
How could it affect GBP/USD?
The BOE needs much more than a quarter percentage point rate increase to extend the ongoing uptrend in the pound. Traders will watch out for Bailey’s presser for fresh hints on future rate hikes and the central bank’s plans to squeeze the balance sheet. A more hawkish tilt could drive GBP/USD past the 1.3600 round level. On the other hand, the pair could witness a ‘sell the fact’ trade should the UK’s central bank deliver a dovish hike. Additionally, the quarterly estimates of the Kingdom’s growth and inflation could also have a significant impact on GBP valuations.
Haresh Menghani, Editor at FXStreet, has outlined important technical levels to trade the major: “The recent move up witnessed over the past one week or so stalled just ahead of the 61.8% Fibonacci retracement level of the 1.3749-1.3358 downfall. A convincing breakthrough of the aforementioned barrier, around the 1.3600 mark, will set the stage for a further near-term appreciating move. The pair would then accelerate the momentum towards an intermediate hurdle near the 1.3660 area before eventually aiming to reclaim the 1.3700 mark.”
“Any meaningful pullback might find decent support and attract fresh buying near the 38.2% Fibo. level, around the 1.3500 psychological mark. The sustained weakness below might prompt some technical selling and drag the pair towards the 23.6% Fibo. level, around mid-1.3400s,” Haresh added.
Key notes
- GBP/USD Price Analysis: Uptrend falters above 21-DMA ahead of BOE rate decision
- BOE Preview: Bailey needs to go beyond a rate hike to boost GBP/USD on Super Thursday
- Ahead of ECB & BoE: 3 Ways to trade rate decisions
About the BOE interest rate decision
The BOE Interest Rate Decision is announced by the Bank of England. If the BOE is hawkish about the inflationary outlook of the economy and raises its benchmark lending rate it is positive, or bullish, for the GBP. Likewise, if the BOE has a dovish view on the UK economy and keeps the ongoing benchmark rate the same or cuts the rate it is seen as negative, or bearish.
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