- Yesterday, BoE raised the interest rate from 0.75% to 1.00%.
- The bank forecasts that CPI inflation could exceed 10% in the fourth quarter of this year.
- A move below 1.2330 will push GBP/USD towards the next support level at 1.2315.
British Pound Remains Under Strong Pressure After BoE Interest Rate Decision
GBP/USD is currently trying to settle below the support at 1.2330, while the U.S. dollar is gaining ground against a broad basket of currencies.
The U.S. Dollar Index is testing the resistance level at 103.80. In case this test is successful, the U.S. Dollar Index will move towards the 104 level, which will be bearish for GBP/USD.
Yesterday, the Bank of England raised the interest rate from 0.75% to 1.00%, in line with the analyst consensus. The Bank noted that CPI inflation could get above the 10% level at its peak in the fourth quarter of 2022 due to rising household energy prices. At the same time, the Bank expects that UK GDP growth will slow sharply.
The weak outlook served as the key bearish catalyst for the British pound, which declined towards levels that were last seen back in 2020. Traders bet that BoE will not be able to raise its interest rate aggressively as the economy is too weak, while the Fed would push the rate above the 2.00% level in 2022.
GBP/USD is testing the support level at 1.2330. In case GBP/USD manages to settle below this level, it will head towards the next support, which is located at 1.2315.
A successful test of the support at 1.2315 will open the way to the test of the next support at 1.2290. If GBP/USD declines below this level, it will head towards the support level at 1.2260.
On the upside, the previous support level at 1.2365 will serve as the first resistance level for GBP/USD. If GBP/USD climbs back above this level, it will head towards the next resistance at 1.2380. A move above this level will push GBP/USD towards the resistance at 1.2410.
For a look at all of today’s economic events, check out our economic calendar.