The Bank of England (BoE) adhered to market expectations during its Super Thursday event, maintaining its policy rate at 5.25%. The decision was in line with the consensus forecast, with a 7-2 vote in favor of keeping rates unchanged, while two members advocated for a rate cut.
While Governor Andrew Bailey expressed optimism about the progress, a second official endorsing a rate cut suggests the BoE’s ongoing consideration of lowering interest rates. The post-meeting statement emphasized the BoE’s intention to closely monitor upcoming economic data.
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Key takeaways from the statement include Bailey’s optimism about progress and the consideration of upcoming data to assess the risk of inflation persistence. The forecast indicates a return of CPI to the 2% target in Q2 2024, along with projections for GDP growth in 2024, 2025, and 2026.
Market reaction to the event saw GBP/USD retreat to a new two-week low, reflecting the BoE’s interest rate decision. However, GBP remained strong against the US Dollar compared to other major currencies.
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Looking ahead, despite the ongoing recovery of GBP/USD, a clear break above the critical 200-day Simple Moving Average at 1.2545 is needed for further gains.
Conversely, a resurgence of the selling bias could prompt corrective moves, with immediate support at 1.2299 and further weakness expected if the October 2023 low of 1.2037 is breached.
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