GBP/USD – Sinks to three-month low after BoE monetary policy report hearing

  • Dovish BoE commentary weighs on the pound
  • Two more rate hikes are still heavily priced in
  • Major support below around the 200/233-day SMA band

The monetary policy report hearing can often be a much-hyped but ultimately anti-climactic event, with policymakers sticking to the script whenever possible and the Treasury Select Committee frequently blurring the lines between politics and central banking.

While that was probably largely true today, it was interesting that Governor Bailey and his colleagues share the view that there is no pre-determined outcome at the next meeting – hike or no hike – which isn’t something that can be said over much of the last couple of years.

A rate hike is still extremely likely at the next meeting on 21 September (82.8% priced in) and one more is still almost fully priced in, which is arguably a surprise based on today’s comments.

BoE Interest Rate Probabilities

Source – Refitiv Eikon

Sterling slides after dovish commentary

The pound clearly responded to the comments during the hearing, slipping against the dollar to a three-month low.

GBPUSD Daily

Source – OANDA on Trading View

What’s more, that was seemingly backed by momentum, with the stochastic and MACD both recording lower lows at the same time. It also confirmed the rebound off the 55/89-day simple moving average band last week which looked quite a bearish move at the time.

The focus now is on the 200/233-day SMA band, a break of which would further solidify the bearish appearance in the pair. This falls around 1.23-1.24, around the May lows and an area that was firm support in the second quarter of the year.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.