Yesterday, the Bank of England’s decision had a significant impact on the pound, which strengthened against other currencies. Although the Official Bank Rate remained unchanged at 3.75%, the market was surprised by the “hawkish” signals, which sharply contrasted with the dovish statements made at the February meeting.
According to media reports:
- → None of the nine committee members voted to cut the rate;
- → The phrase stating that the rate “could be lowered in the future” was removed from the final statement.
Thus, the Bank of England indicated that it is ready to raise rates if the energy shock caused by the Middle East conflict accelerates inflation.
The hawkish stance contributed to the pound rising above the upper boundary of the channel in which it had been trading since late January.
Technical Analysis – GBP/USD
Movements in GBP/USD during March suggest that 1.3250 serves as an important support level. Additionally, following yesterday’s news, bulls may find support around 1.3374, where:
- → On 18 March, the market encountered resistance;
- → The upper boundary of the channel was broken yesterday.
On the other hand, the long upper wick on yesterday’s candle (as indicated by the arrow) points to bear activity. Even if the bullish momentum has not yet exhausted itself, further gains in GBP/USD may face resistance at higher levels, including:
- → Psychological level at 1.3500;
- → The high of 10 March;
- → The upper boundary of the expanded double red descending channel.
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