GBPUSD is showing modest gains near 1.2520. The major pair is bouncing off the lows of 1.2445 after the Bank of England (BoE) made a dovish decision. Today, attention will shift to the first UK gross domestic product (GDP) data for Q1.
On Thursday, the Bank of England kept borrowing costs at 5.25% for the sixth consecutive meeting and signaled it could start cutting interest rates as early as next month as inflation is “moving in the right direction.” Bank of England Governor Andrew Bailey told a press conference that “a rate cut next month is quite possible,” but he will wait for inflation, activity and labor market data before making a decision. The UK central bank’s dovish stance, which opened the door for future interest rate cuts, put some pressure on the Pound Sterling (GBP) after the monetary policy meeting.
Bank of England Chief Economist Hugh Pill said that the central bank is more confident that it will consider cutting rates over the next few meetings, although it needs more evidence. Investors expect two rate cuts this year, with the first expected in August.
On the other hand, San Francisco Fed President Mary Daly said late Thursday that uncertainty about inflation over the next few months has increased and it may take “more time” to bring inflation down to the central bank’s target level. The cautious approach to interest rate setting implies that current rates are likely to remain at current levels for a long time to come. The policy divergence between the Bank of England and the Fed is likely to put pressure on the pound and limit the pair’s growth in the near term.
Trading recommendation: Trade mainly with buy orders at the price level of 1.2540. We consider sell orders at the price level of 1.2495.
Origin: FreshForex
