GBP/USD falls to fresh weekly low, bears flirt with 1.2100 level after BoE

• GBP/USD falls for the third consecutive day in reaction to a dovish decision by the Bank of England.
• The BoE raises interest rates by 50 basis points and indicates that monetary policy is not on a pre-established path.
• Investors are now waiting for the post-meeting press conference for further momentum.

The pair GBP/USD it was struggling to find acceptance above the 1.2200 level for the second day in a row and witnessed aggressive selling after the Bank of England announced its monetary policy decision. The pair has momentarily dipped below the round level of 1.2100reaching a new weekly low.

As expected, the Monetary Policy Committee (MPC) of the Bank of England voted unanimously to raise the reference rate by 50 basis points (the highest since 1995) to 1.75%, the highest level since late 2008. However, the huge rate hike was already discounted in the markets and thus sparked the typical “buy the rumor and sell the fact” trade around the British pound.

In the accompanying monetary policy statement, the UK central bank indicated that monetary policy does not follow a pre-established path. This, in turn, suggests the BoE is more likely to slow its tightening cycle amid growing fears of a recession. This is reinforced by the fact that the BoE now estimates that GDP will fall by 0.2% during the second quarter.

The BoE further adds that the risks surrounding the projections are currently exceptionally large. The immediate reaction, meanwhile, suggests a pessimistic assessment of the market and supports the prospects of a further bearish movement for the GBP/USD pair. That said, traders are likely to wait for the post-meeting press conference before opening any new directional positions.

GBP/USD technical levels