Sterling FX traders have had a busy time over the past couple of trading sessions, reacting to a more hawkish Federal Reserve. Cable now sits at a crucial technical level ahead of the key Bank of England rate decision later today. The Monetary Policy Committee (MPC) is widely expected to hold rates steady at 4.75% after recent inflation data confirmed that both core prices and wages remain ‘sticky’ in the current environment. The market is now pricing in the next rate cut from the Bank to come in May, whereas March had been anticipated less than a week ago. While there had been some hope for cuts as GDP data confirmed significant growth slowing, most traders expect inflation considerations to dominate today’s decision.
Trading opportunities are likely to arise from the message conveyed in the statement and the MPC’s Official Bank Rate Votes. As seen earlier today, any surprises could trigger sharp market movements. A more dovish tone would likely open the way for a downward move, and given the Fed’s overnight update, this could lead to a break of the long-term trendline support and a test of annual lows. Conversely, a more hawkish stance could prompt a relief rally, although this is expected to be limited due to the prevailing bullish sentiment towards the dollar.
Resistance 2: 1.3348 – Trendline Resistance
Resistance 1: 1.2815 – 200-Day Moving Average
Support 1: 1.2555 – Trendline Support
Support 2: 1.2484 – 2024 Low
