The GBP/USD dropped on Tuesday, as the Bank of England unexpectedly cut interest rates.
By the middle of Wednesday's London trading hours, the currency exchange rate had shortly touched the 1.2850 mark.
Bank of England Rate Cut
The British Pound depreciated against the US Dollar, following the UK Monetary Policy Summary release on Wednesday at 07:00 GMT. The GBP/USD exchange currency rate lost 56 pips or 0.44% after the release. The Pound continued trading at the 1.2900 level against the Greenback after the release.
The Bank of England decided to cut the Official Bank Rate to a target level of 0.25% at an unscheduled emergency meeting.
According to the official release: "Following the spread of Covid-19, risky asset and commodity prices have fallen sharply, and government bond yields reached all-time lows, consistent with a marked deterioration in risk appetite and in the outlooks for global and UK growth. Indicators of financial market uncertainty have reached extreme levels. The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance."
Economic Calendar
During the week, there will be couple events that could affect the GBP/USD rate.
On Wednesday, March 11, the British GDP and Manufacturing Production data will be released at 9:30 GMT. The vent has caused moves from 11.9 to 23.6 pips since October. The largest move of 23.6 pips occurred in February.
At the same day, the US CPI and Core CPI will be published at 12:30 GMT. This event has caused moves from 8.2 to 19.4 pips.
Meanwhile, the week's data is available. Click on the link below to see the historical data tables with the reactions to various events.
GBP/USD short-term review
Yesterday, the GBP/USD exchange rate declined to the lower boundary of a medium-term ascending channel at 1.2870. During Wednesday morning, the rate was testing the lower channel line.From a theoretical point of view, it is likely that a reversal north could occur in the nearest future. In this case the currency pair could re-test the monthly R1 at 1.3096.
However, note that the exchange rate is pressured by the 55– and 100-hour SMAs near 1.3000. Thus, a breakout south could occur. In this case the rate has to surpass the weekly S1 at 1.2844.
Hourly Chart
On the daily candle chart, the rate has dropped below the 55 and 100-day simple moving averages, which were located near the 1.3000 level.
In the meantime, by connecting the February and December low levels and setting the parallel line at the December 16 high level, once can observe a channel down pattern. The recent decline was consistent with the pattern. Daily chart
On Tuesday, the sentiment was 53% short. Traders continue to bounce around in the neutral zone.