GBP/USD Price Analysis: Pound Falls After BOE’s Dovish Rate Hike

• The BOE increased rates on Thursday by 25bps.

• Most central banks have emphasized inflation while downplaying worries about financial stability.

• This year, the best-performing G7 currency pair is the pound.

Today’s GBP/USD price analysis is slightly bearish. On Thursday, the Bank of England (BoE) increased interest rates and stated that it expects the recent spike in British inflation to slow down faster than before. This caused volatility in the pound.

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The BoE maintained that its Monetary Policy Committee saw less urgency in maintaining its rapid run of rate hikes. The bank hiked interest rates by another quarter of a percentage point to 4.25% on Thursday despite the unexpected jump in inflation revealed on Wednesday.

The nine rate-setters at the BoE voted 7-2 in favor of boosting the Bank Rate by 25 basis points. They sounded more upbeat about the future of the slow economic growth in the nation.

The BoE’s move follows similar rate hikes by several other central banks, including the Fed, which raised rates by 25 basis points to the 4.75%–5.00% range on Wednesday. Last week, the European Central Bank increased rates by 50 basis points to 3%.

The UK central bank is attempting to balance persistently high inflation with a bleak economic outlook and worries about international banks.

This week, most central banks have emphasized inflation while downplaying worries about financial stability. They seem confident that financial pressures will be kept in check.

This year, the best-performing G7 currency pair is the pound, which recovered from a 10.6% decline in 2022 during a turbulent year for British assets. In contrast, the dollar index has been weaker this month due to the turmoil in the US banking sector.

GBP/USD key events today

Investors will get a better look at the UK economy when retail sales and PMI data are released later in the day.

GBP/USD technical price analysis: Bulls weakened at the 1.2345 level

The 4-hour chart shows GBP/USD in a bullish trend, with the price making higher highs and higher lows and respecting the 30-SMA as support. The RSI also supports bullish momentum as it trades above the 50-mark.

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At the same time, the RSI has made a bearish divergence with the price, a sign of weakness. The price is pulling back from the 1.2345 level and might break below the 30-SMA. Bulls can only continue the uptrend on a strong break above the 1.2345 resistance.

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