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.
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.
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.
