When is the Bank of England (BoE) interest 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 this Thursday at 12:00 GMT. The UK central bank is expected to raise interest rates for the 10th time in a row, by another 50 bps, to the highest level since autumn 2008. That said, signs of easing inflationary pressures might have already set the stage for a dovish pivot amid looming recession risks. Hence, the focus will be on the accompanying statement that provides the Monetary Policy Committee's (MPC) economic and inflation projections. Apart from this, investors will scrutinize BoE Governor Andrew Bailey's comments at the post-meeting press conference at 12:30 GMT.

According to Dhwani Mehta, Senior Analyst and Asian Session Manager at FXStreet: “The language in the central bank’s policy statement, the Minutes of the meetings and Governor Bailey’s presser could hint that the BoE will likely keep up interest rate increases, watering down expectations of the bank signaling a pause in its tightening cycle this month.”

Analysts at Wells Fargo offer a brief overview and write: “With recession on the horizon, we believe the BoE will take a more gradual approach to rate hikes. As of now, financial markets are priced for a 50 bps hike and our peer economists forecast the BoE to lift policy rates by 50 bps as well. However, we believe policymakers will take a more measured approach and lift rates by only 25 bps as they are now more focused on protecting against a prolonged recession. Following this meeting, another 25 bps hike in Q1 is likely, and at the March meeting, we believe policymakers will signal an end to their tightening cycle.”

How could it affect GBP/USD?

Heading into the key central bank event risk, the GBP/USD pair meets with a fresh supply near the 1.2400 mark and reverses a major part of the previous day's post-FOMC positive move. A dovish BoE tilt could exert additional downward pressure on the British Pound and set the stage for an extension of the pair's recent pullback from the vicinity of mid-1.2400s, or the highest level since June 2022.

Conversely, the market reaction to a 50 bps and (or) a neutral stance might fail to impress bulls, suggesting that the path of least resistance for the GBP/USD pair is to the downside. That said, a more hawkish stance, though seems unlikely, should push spot prices beyond the 1.2445 hurdle and set the stage for some meaningful appreciating move in the near term.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical overview and explains: “GBP/USD failed to stay within the ascending regression channel coming from early January after having recovered within it late Wednesday. Additionally, the pair was last seen trading below the 20 and the 50-period Simple Moving Averages (SMA) on the four-hour chart with the Relative Strength Index (RSI) indicator dropping below 50, highlighting the lack of buyer interest.”

Eren also outlines important technical levels to trade the GBP/USD pair: “On the downside, the 100-period SMA aligns as first support at 1.2325 ahead of 1.2300 (psychological level, Fibonacci 23.6% retracement of the latest uptrend). A four-hour close below the latter could attract sellers and cause the pair to decline toward 1.2270 (static level) and 1.2210 (Fibonacci 38.2% retracement).”

“1.2360 (50-period SMA) forms interim resistance before 1.2400 (psychological level, static level). If buyers manage to flip the latter into support, GBP/USD could extend its recovery toward 1.2450 (static level, mid-point of the channel),” Eren adds further.

Key Notes

  •  BoE Interest Rate Decision Preview: The last 50 bps hike but not the end yet

  •  BoE Preview: Forecasts from nine major banks, preparing to gear down

  •  GBP/USD Forecast: BOE doves could weigh on Pound Sterling

About the BoE interest rate decision

The 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 will be 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 will be seen as negative, or bearish.