GBP/USD drops to fresh two-week low post-BoE, focus shifts to Bailey's press conference

• GBP/USD refreshes a two-week low after the BoE announced the expected 75 bps rate hike.
• A lower terminal rate than is currently priced in the markets weighs on the British pound.
• The Fed’s more hawkish outlook continues to boost the USD and exerts additional pressure.

The GBP/USD pair adds to its heavy intraday losses and drops a fresh two-week low after the Bank of England announced its policy decision. Spot prices, however, show some resilience below the 1.1200 mark and quickly bounce back closer to mid-1.1200s in the last hour.

As was widely anticipated, the UK central bank decided to raise interest rates by 75 bps - the biggest hike since 1989. In the accompanying policy statement, the BoE indicates a lower terminal rate than the 5.20% currently priced in the markets. This, along with a bleak outlook for the UK economy, prompts fresh selling around the GBP/USD pair amid strong follow-through US Dollar buying.

The Federal Reserve on Wednesday adopted a more hawkish stance and indicated that it will continue to raise interest rates to combat stubbornly high inflation. This, in turn, pushes the rate-sensitive two-year US government bond to its highest level since May 2006 and underpins the buck. Apart from this, a weaker risk tone offers additional support to the safe-haven greenback.

Market participants now look forward to BoE Governor Andrew Bailey's comments at the post-meeting press conference for a fresh impetus. Apart from this, traders will take cues from the US ISM Services PMI to grab short-term opportunities around the GBP/USD pair.

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