GBP/USD reacts to Bank of England

Source: Dukascopy Bank SA


The Bank of England suddenly announced on Wednesday that it would buy government bonds for a total amount of 65 billion, despite ongoing monetary tightening.

Initially, the rate was highly volatile and declined, as additional 65 billion Pounds would be poured into the economy. However, the central bank afterwards stated that it would still stick to rate hikes. Additional stimulus is set to force the BoE to hike interest rates more than previously expected. This realization caused a surge of the Pound and weakening of the US Dollar.

During late Wednesday's trading, the GBP/USD encountered resistance in the 1.0900 level and started a decline. On Thursday morning, the pair was finding support in the 50-hour simple moving average near 1.0780.

A move below 1.0780 could find support in the 1.0700, 1.0600 and 1.0500 levels, before the pair reaches the Monday's low level at 1.0330. On the other hand, a surge of the Pound against the US Dollar is set to face the resistance of the 1.0900 level, before approaching 1.1000, the weekly simple pivot point at 1.1049 and the 200-hour simple moving average.
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