12:07, 24 September

Returns to Key 1.3050 Level as BOE Sell Hike

To close out last week the GBPUSD moved excessively up to a two month high just shy of 1.33 before falling even further the next day back down to the key 1.3050 level. It had moved steadily higher in the week leading up to the two month high. In the last few weeks the GBP-USD rallied strongly however it ran into a wall of resistance at 1.3050 which repelled the sterling on several occasions. Around mid-August, the GBPUSD also rallied well which saw it regain lost ground from a 15 month low below 1.27, before reversing strongly again at 1.3050. Just prior to its strong fall to below 1.27, the GBPUSD was content to trade in a very small range right around the 1.31 level. It was also feeling some selling pressure from the resistance level at 1.32.

The 1.30 level that provided strong support to the GBPUSD and was a key level throughout 2017 seems to have lost its significance as the 1.3050 is more relevant presently. Throughout most of May, the GBPUSD dropped dramatically from the resistance level around 1.43 down to the 1.32 level. The 1.36 level provided some resistance to the sterling in the last nine months or so and providing a little bit of support, except the GBPUSD continued lower through this level.

It was only a few months ago that we were looking at the resistance level at 1.43 looming like a dark cloud in the distance ready to strike. Several times this year the resistance around that level stood firm and sellers jumped all over the GBPUSD forcing it down to several lows. Interestingly, despite all the aggressive selling, it wasn’t so long ago the GBPUSD hit a two year high above 1.43.

Only a month after raising the official interest rate for only the second time in more than ten years, the Bank of England (BOE) kept interest rates on hold. In doing so, they highlighted greater financial market concerns surrounding Brexit. The Monetary Policy Committee (MPC) voted unanimously to hold rates at 0.75%, in line with economists' expectations in a Reuters poll. The BOE said there had been limited domestic developments since its August 2 meeting, other than on Brexit. The central bank said, "Since the Committee's previous meeting, there have been indications, most prominently in financial markets, of greater uncertainty about future developments in the (European Union) withdrawal process."It is expected that the BOE won’t want to unsettle the UK economic recovery with an unexpected rate rise. Most economists polled by Reuters do not expect the BOE to raise rates again until after Britain has left the EU. This week some members of the BOE have their opportunity to share their comments on interest rates as four members of the MPC are making public appearances.