GBP/USD plummets to 1.3100 mark on BoE's 8-1 rate hike vote distribution

• GBP/USD witnessed a dramatic turnaround after the BoE announced its policy decision.
• The 8-1 vote distribution to hike rate disappointed investors and weighed on sterling.
• Hopes for diplomacy in Ukraine undermined the safe-haven USD and might limit losses.

The GBP/USD pair plunged over 100 pips from a near two-week high and refreshed daily low, around the 1.3100 mark after the Bank of England announced its policy decision.

As was widely expected, the UK central bank raised its key rate by 25 bps to 0.75% at the end of the March policy meeting this Thursday. This marked the third straight hike in as many meetings, though the 8-1 vote distribution disappointed investors and prompted aggressive selling around the GBP/USD pair.

Moreover, the markets had priced in 40% chances of a 50 bps rate hike. This, along with the uncertain outlook in the wake of Russia's invasion of Ukraine and growth concerns, further weighed on the British pound. This, in turn, was seen as a key factor behind the GBP/USD pair dramatic intraday turnaround.

That said, the optimism over a possible diplomatic solution to end the war in Ukraine continued weighing on the safe-haven US dollar. This should hold back bearish traders from placing aggressive bets around the GBP/USD pair, warranting caution before confirming that the recent bounce from the YTD low has run its course.

Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and Industrial Production data. This, along with the broader market risk sentiment, might influence the USD price dynamics and provide some impetus to the GBP/USD pair.

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