The British Pound (GBP) is under severe pressure against the US Dollar (USD) during the early European trading session on Thursday, holding onto recent losses near 1.3378. The GBP/USD pair remains vulnerable as the US Dollar outperforms, following the Federal Reserves (Fed) monetary policy announcement on Wednesday.
The British currency is expected to remain highly volatile as the Bank of England (BoE) is scheduled to announce its monetary policy at 11:00 GMT.
BoE seen on hold as softer UK data give room to pause
Strategists at Brown Brothers Harriman (BBH) note that the BoE is “widely expected to keep the policy rate at 3.75% for a sixth straight meeting” at Thursdays decision. They anticipate “another 6-3 vote,” with Megan Greene, Catherine L Mann and Huw Pill “backing a 25bps hike,” even as the majority opts to stay on hold.
As the BoE is almost certain to maintain the status-quo, market reaction on the Pound Sterling will likely hinge on inflation and the monetary policy outlook.
The Consumer Price Index (CPI) report showed on Wednesday that the headline inflation accelerated to 3.1% Year-on-Year (YoY) in August from 2.9% in July, with core figure remaining steady at 2.6% YoY.
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GBP/USD Technical Analysis
In the daily chart, GBP/USD trades at 1.3381, keeping a bearish near-term tone as spot holds below the 20-period exponential moving average (EMA) at 1.3498. The pair has retreated from recent highs and now trades under this short-term trend indicator, suggesting that rallies are likely to be capped while the EMA remains overhead.
The Relative Strength Index (14) has slipped toward the low-30s, hinting at emerging oversold conditions but not yet strong enough to outweigh the pressure from the dominant overhead resistance.
On the topside, initial resistance is defined by the 20-period EMA at 1.3498, and a sustained break above this level would be needed to ease the current bearish bias and open the door to a deeper corrective bounce. On the downside, the July 30 low at 1.3333 is the key support level, followed by the July 28 low at 1.3274.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
BoE Interest Rate Decision
The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.