When is the BoE monetary policy decision and how could it affect GBP/USD?

BoE Monetary Policy Decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 12:00 GMT. Analysts believed that the rapid spread of the Omicron variant has raised uncertainty about the economic recovery in the short term and could persuade the BoE to hold its fire. That said, an unexpectedly sharp jump in the UK inflation has added pressure on the UK central bank to hike interest rates, making today's decision more relevant for the FX markets.

As Yohay Elam, Analyst at FXStreet, explains:” It is hard to see the hawks mustering more backing given the Omicron uncertainty, but other considerations such as inflation, jobs shortage, rising home prices, and other factors mean this scenario is a possibility.”

How could it affect GBP/USD?

Should the BoE decide to maintain the status-quo, the vote distribution and the policy outlook for next year will play a key role in influencing the British pound. A clear hint that the BoE would hike rates in February should be enough to provide a strong boost to the sterling. This, in turn, would set the stage for an extension of the pair's recent recovery from the YTD low. Conversely, a less hawkish outcome could prompt some selling around the pair, though the post-FOMC US dollar retracement slide should help limit any meaningful downside.

Meanwhile, Eren Sengezer, Editor at FXStreet, outlined important technical levels to trade the major: “GBP/USD is testing 1.3300 (psycholoıgical level, static level) and a hawkish BOE open the door for additional gains toward 1.3330 (static level) and 1.3380 (200-period SMA on the four-hour chart). 1.3400 (psychological level) aligns as the next resistance.”

“On the downside, 1.3270 (100-period SMA) is the first support before 1.3240 (20-period SMA, 50-period SMA) and 1.3200/1.3190 (psychological level, static level),” Eren added further.

Key Notes

  •  BOE Preview: Omicron eliminates rate hike chances, voting pattern critical to GBP/USD reaction

  •  BoE Preview: Forecasts from 10 major banks, no hike due to Omicron

  •  GBP/USD Forecast: GBP/USD could target 1.3380 if BOE goes for a rate hike

About the BoE interest rate decision

BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.