BoE remains on hold with a 6-3 vote count

BoE kept its interest rate unchanged at +0.50% yesterday, as it was widely expected. The accompanying statement provided comments regarding inflation, the GDP, household spending and the bank’s QE program. In general, the accompanying statement could be characterized as neutral to hawkish. The surprise element of the decision was that one MPC member, namely Andy Haldane, switched sides in favor for a rate hike and the vote count was 6-3, underscoring a hawkish element of the decision. Overall, the decision provided a strong support for the pound as anticipations for an August rate hike increased and we could see the pound riding that wave for a few days.

GBP/USD dropped in anticipation of the BoE’s interest rate decision in the early European session, breaking the 1.3125 support line. However, once the decision was announced and later on, it rose breaking consecutively the 1.3125 and the 1.3215 resistance lines and then stabilizing. The pair could continue to trade in a sideways manner today, however some bullish tendencies could occur. Should the bulls take the reins we could see the pair, breaking the 1.3330 resistance line. Should the bears take over, we could see the pair breaking the 1.3215 support line and aim for the 1.3125 support level. Also the drop could have contributed to the slight weakening of the US 10 year treasury yields adding further pressure to the USD. Should the yields continue to drop we could see USD continuing to slip for the next few days.