Pound Slips Ahead of BoE Meeting Amid Rate Cut Speculation; GBP/USD Vulnerable to Dovish Signals
The British pound showed signs of weakness ahead of the Bank of England (BoE) meeting scheduled for Thursday, with the likelihood of a rate cut in June hovering around 50%. GBP/USD closed slightly lower during North American trading, settling at 1.2495 after moving between 1.2510 and 1.2470 on Wednesday.
Market expectations anticipate the BoE to maintain current interest rates, but investors are closely watching for any dovish signals during the meeting. A vote count favoring a rate cut could increase the chances of a June cut, potentially pushing GBP/USD lower. According to the London Stock Exchange Group’s Interest Rate Probability Report (IRPR), there’s approximately a 50% probability of a rate cut in June, with a fully priced-in expectation for a cut in August and a potential total decrease of 55 basis points by December. On the other hand, the Federal Reserve’s projections indicate an 80% probability of a rate cut in September, with an expected decrease of 44 basis points by the December 18 Fed meeting.
GBP/USD is currently finding support at the 20-day moving average of 1.2480, while resistance levels are seen at Wednesday’s peak of 1.2522, the 50-day moving average of 1.2520, and the 200-day moving average of 1.2540. Risks appear tilted towards the downside due to the potential for dovish signals from the BoE. Early in North American trading, the sterling weakened further, hitting a one-week low of 1.2472 as traders adjusted their positions ahead of the BoE rate decision and subsequent press conference, which could add more pressure on the pound. While the consensus expects the BoE to maintain rates, the focus will be on the voting outcome. Any additional BoE members advocating for a rate cut might raise expectations for a June cut, potentially driving GBP/USD towards support levels at 1.2420 and 1.2305. Both BoE and Fed members are likely to stress their achievements in managing inflation and their dedication to achieving target levels. Should the BoE’s decision or comments be interpreted as dovish, traders may react preemptively before the release of CPI data later in the month, leading to a decline in GBP/USD.
Key Levels to Watch: : 1.2565,1.2508,1.2454
