GBP/USD rallies, nearing 1.2755 post-BoE decision, highest peak since August

• The GBP/USD rides high on momentum, bouncing towards the 1.2730 level after hitting a high at around 1.2755.
• GBP gains bolstered by market forecasts of reduced easing from the Bank of England in 2024.
• On the other hand, dovish bets on the Fed weakened the US Dollar.

In Thursday's session, the GBP/USD pair surged after the Bank of England's (BoE) recent decision and jumped to its highest point since August at around 1.2755. The rapid ascend was largely motivated by the central bank's hawkish policy stance, which has boosted Sterling's value against the US Dollar.

In line with that, the BoE has once again retained the interest rates at 5.25%, continuing this trend for a third successive time. Despite this, a hint towards additional monetary tightening was signaled if enduring inflationary pressures occur. Governor Andrew Bailey highlighted the potential for future policy tightening while adhering to the higher interest rates for  longer stance. Regarding the vote split, three out of the nine Monetary Policy Committee (MPC) members favored an incremental rise of 0.25% to 5.50% in interest rates.

Following the decision, swaps markets have adjusted their expectations regarding rate cuts by the BoE. Previously, they anticipated a total of 115 basis points in cuts by next year’s end, but following today’s decision, investors now see 107 bps of easing. In line with that, the GBP gained strength against the USD as the Federal Reserve (Fed) hinted on Wednesday that in 2024, there will be more easing than expected.

GBP/USD levels to watch

The indicators on the daily chart reflect that buying momentum is significantly overpowering the selling pressure. Firstly, the steep positive slope of the Relative Strength Index (RSI) is a strong indication that buyers are dominating this market, pushing it well into positive territory..

Meanwhile, the Moving Average Convergence Divergence (MACD) is printing rising green bars, further suggesting that the pair is finding robust buying interest..

Lastly, looking at the Simple Moving Averages (SMAs), the pair comfortably trades above its 20, 100, and 200-day SMAs on the larger time frames. This positioning above these key SMAs adds further weight to a bullish outlook, implying that the buyers are firmly maintaining control over the longer term.

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

GBP/USD daily chart