BOE On Deck

All eyes are on the Bank of England today as it meets for its May monetary policy meeting. Today’s meeting will be one of the bank’s ‘super Thursday’ events, meaning the rate decision, meeting minutes and updated forecasts will all take place today. Ahead of the meeting, we’re seeing some selling pressure in GBP, suggesting that traders are wary of downside risks. While no change in policy is expected today, traders will be paying close attention to the bank’s forward guidance, the voting split any changes in forecast which might act as clues as to how the bank is likely to deliver policy over the remainder of the year.

Voting Split

At the last meeting, 9 members voted unanimously in favour of holding rates steady. However, today there are risks that we see some shift towards voting for a cut. If seen, this will be a firm dovish indicator, leading GBP lower near-term. With UK CPI continuing to fall, traders will be looking for some guidance today that rate cuts are approaching.

Inflation Forecast & Easing Signals

While a rate cut next month might still be too early, the BOE might well signal that if inflation continues to fall through the next meeting, an August cut looks likely. Additionally, traders will be watching for any lowering of inflation forecasts, which should bolster the view that the bank intends to press ahead with easing, again weighing on GBP near-term.

Technical Views

GBPUSD

The latest test of the bearish trend line has seen GBPUSD failing around the 1.2612 level resistance. Price is now turning sharply lower with a fresh test of support at 1.2437 in sight. If price breaks below this level, 1.2302 will be the next support to watch.