When is the Bank of England rate decision and how could it affect GBP/USD?

BoE monetary policy decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision at 12:00 GMT this Thursday. The UK central bank is widely anticipated to keep its policy settings unchanged, i.e. leave the benchmark interest rate and the size of the Asset Purchase Facility unchanged at 0.10% and £895 billion, respectively. The only thing the market will care about is the likelihood of negative interest rates.

Hence, the focus will be on the accompanying monetary policy statement and updated economic projections. Given the third nationwide lockdown, market participants anticipate a downward revision of growth forecast for 2021. This will be followed by the post-meeting press conference, where comments by the BoE Governor Andrew Bailey might influence some volatility around the British pound.

How could it affect GBP/USD?

Ahead of the key event risk, the GBP/USD pair dropped to two-and-half-week lows, further below the 1.3600 mark and was pressured by sustained US dollar buying interest. A surprise rate cut – though seems unlikely – or hints of lowering rates in future could exert some heavy downward pressure on the sterling. Conversely, an upbeat economic assessment – amid the speedy rollout of COVID-19 vaccine in the UK – could provide a modest lift to the pound.

Meanwhile, Yohay Elam, FXStreet's own analyst provided a brief technical outlook for the GBP/USD pair: “Pound/dollar's break below the uptrend support line has proved significant, resulting in an extended fall to the downside. On its way down, cable broke below the 200 Simple Moving Average on the four-hour chart, a bearish sign. On the other hand, the Relative Strength Index is nearing 30 – about to enter oversold conditions.”

Yohay further outlined important technical levels to trade the major: “Support awaits at 1.3570, the daily low, followed by 1.3530, a swing low in mid-January. It is followed by 1.3450. Some resistance awaits at 1.3610, the previous trough, followed by 1.3680, a peak earlier in the week. The next level to watch is 1.3725.”

Key Notes

  •  Bank of England Preview: Bailey set to abandon negative rates, injecting sterling with new energy

  •  GBP/USD Forecast: Sterling surrenders to dollar strength, can the BOE bail it out?

  •  GBP/USD to find support ahead of 1.35 – Westpac

About the BoE interest rate decision

BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.