GBP/USD slides back closer to weekly low, around mid-1.2400s post-BoE

• GBP/USD witnessed some selling after the BoE announced its policy decision.
• The MPC voted unanimously to hike rates for the fourth straight meeting.
• A dovish outlook weighed on the British pound amid resurgent USD demand.

The GBP/USD pair added to its intraday losses and dropped to a fresh daily low, around mid-1.2400s after the Bank of England announced its policy decision.

As was widely expected, the UK central bank raised interest rates by 25 bps for the fourth time since December at the end of its May policy meeting this Thursday. Six BoE MPC members voted in favour of a 25 bps rise, and three voted to raise rates by 50 bps. Adding to this, the accompanying monetary policy statement suggested that some degree of further tightening in monetary may still be appropriate in the coming months.

That said, two MPC members judged rate guidance as inappropriate considering that risks to growth and inflation are more balanced. Moreover, the BoE now sees the UK economy contracting by 0.25% in 2023, which was seen as a dovish tilt and turned out to be a key factor that weighed on the British pound. Apart from this, resurgent US dollar demand exerted additional downward pressure on the GBP/USD pair and contributed to the slide.

With the latest leg down, the GBP/USD pair has now dropped to the lower end of a near one-week-old trading range. Some follow-through selling would mark a fresh bearish breakdown and drag spot prices back towards the YTD low, around the 1.2410 region touched last week.

Technical levels to watch