GBP/USD rallies following BoE rate decision

The GBP/USD pair has touched its highest peak since August. The pair also rides high on momentum, bouncing towards the 1.2730 level after hitting a high at around 1.2755.

The pair’s rally was driven by the Bank of England’s hawkish policy stance, which has boosted the Sterling’s value against the US Dollar. The BoE has retained interest rates at 5.25% for a third consecutive time, but a hint of additional monetary tightening was signaled if inflationary pressures persist.

BoE Governor Andrew Bailey emphasized the possibility of further policy tightening while maintaining a longer-term commitment to higher interest rates. Three of the nine members of the Monetary Policy Committee (MPC) supported a gradual increase in interest rates of 0.25% to 5.50%.

The swaps markets revised their projections for the BoE’s rate cuts, with 107 basis points of easing now anticipated. On Wednesday, the Federal Reserve made a suggestion that there will be more relaxation than anticipated in 2024.

Indicators on the daily chart reflect that buying momentum is significantly overpowering selling pressure. The steep positive slope of the Relative Strength Index (RSI) indicates that buyers are dominating the market, while the Moving Average Convergence Divergence (MACD) indicates robust buying interest. The pair comfortably trades above its 20, 100, and 200-day Simple Moving Averages (SMAs), adding further weight to a bullish outlook.

Support Levels: 1.2670, 1.2630, 1.2600 (20-day SMA).
Resistance Levels: 1.2760, 1.2800, 1.2830.