GBP/USD jumped after BOE decision but bearish trend remains
- The GBP/USD price rose after the BOE interest rate decision.
- No member of the committee voted to slash rates.
- But the pair is still under pressure because of the stronger dollar.
The GBP/USD rose today after the Bank of England (BOE) delivered its interest rate decision. The pair is trading at 1.3450, which is 0.80% below the year-to-date high of 1.3760.
BOE interest rate decision
The UK economy is struggling as the economy continues to battle the current wave of the virus. Data released this week showed that the manufacturing PMI improved partly because of lengthier delivery times caused by Brexit and Covid.
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On Wednesday, data showed that the UK services dropped to 38.8, the lowest level since April last year. And today, Markit said that the construction PMI declined to 49.2 from the previous 54.6. This happened since most construction work was deemed as being non-essential.
Meanwhile, recent data showed that the UK retail sales are relatively weak while the unemployment rate and public debt have continued rising. And economists believe that the situation will worsen when the government ends its furlough program in April.
It is against this backdrop that the BOE held its first meeting of the year. The bank left interest rates unchanged at 0.10% as most analysts were expecting. It also left the quantitative easing total to 875 billion pounds. The total target of these purchases is 895 billion pounds.
In the statement, the bank said that it expects the economy to contract by about 4% in the first quarter of this year. It also said that the real unemployment rate is above the 5% reported by the ONS in January. The statement added:
“If the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit. The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made.”
Looking ahead, the GBP/USD will react to the US nonfarm payroll numbers that will come out tomorrow. Economists expect that the economy added more than 140,000 jobs as the unemployment rate remained at 6.7%.
GBP/USD technical analysis
The GBP/USD pair bounced back after the BOE rate decision. The pair rose from the intraday low of 1.3565 to the current 1.3650. On the four-hour chart, the price is at an important level of resistance. It is still below the 25-period moving average and the Ichimoku cloud. Also, the pair has found a substantial resistance at the year-to-date high of 1.3760. Therefore, in my view, the pair will still resume the previous downtrend. This action will be confirmed if it manages to move below the intraday at 1.3565. You can use the risk management tools provided by your forex broker to mitigate any risks.