Following last Thursday’s meeting, the policy rate was cut to 4.00%—the fifth reduction in a row since August last year—marking a dovish turn from the 16-year peak of 5.25% despite June inflation accelerating to 3.6%, well above the 2.0% target. Policymakers attribute the uptick to higher food and energy costs and expect inflation to return to 2.0% by Q2 2027. The central bank now faces a difficult trade-off: continue restraining consumer prices or support an economy likely to slow further amid the White House’s trade stance, even though a US–UK agreement was among the earliest concluded. Data show GDP growth eased to 0.1% in Q2 from 0.7% in Q1, while GDP is expected to add 0.3% in Q3.
The BoE’s quarterly survey also indicated fewer investors expect officials to maintain next year’s quantitative tightening pace at 100.0 billion pounds; the projection was revised to 75.0 billion. Median expectations for lower borrowing costs changed little versus three months ago: markets still look for a gradual decline in the policy rate to a trough of 3.25% by the 30 April meeting next year.
Meanwhile, the US dollar holds near 97.80 on the USDX, recovering after reports of a US–Russia presidential meeting on 15 August in Alaska, where a long-term settlement of the Russia–Ukraine conflict is expected to be discussed. Tomorrow at 14:30 (GMT+2), July inflation will be in focus: headline readings are forecast to shift from 2.7% to 2.8% y/y and from 0.3% to 0.2% m/m, while core is seen moving from 2.9% to 3.0% y/y and from 0.2% to 0.3% m/m. The print will heavily influence the tone at the next FOMC meeting.
Support and Resistance
The pair has been advancing since the start of the month and is currently holding above 1.3428 (Murray [4/8], 23.6% Fibonacci retracement), opening the path to 1.3611 (Murray [7/8]) and 1.3794 (Murray [+2/8]). For bears, the key marker is 1.3306 (Murray [2/8]); a renewed break lower would target 1.3184 (Murray [0/8], 38.2% Fibonacci) and 1.2975 (50.0% Fibonacci).
Technical signals are mixed: Bollinger Bands slope lower, Stochastic points higher but is in overbought—leaving room for a pullback—while MACD is preparing to cross into negative territory.
Resistance: 1.3611, 1.3794.
Support: 1.3306, 1.3184, 1.2975.
Trading Scenarios
Long Setup: Buy stop at 1.3490 targeting 1.3611 and 1.3794; stop loss 1.3400. Horizon: 5–7 days.
Short Setup: Sell stop below 1.3306 targeting 1.3184 and 1.2975; stop loss 1.3390.
Scenario
Timeframe: Weekly
Recommendation: BUY STOP
Entry: 1.3490
Take Profit: 1.3611, 1.3794
Stop Loss: 1.3400
Key Levels: 1.2975, 1.3184, 1.3306, 1.3611, 1.3794
Alternative Scenario
Recommendation: SELL STOP
Entry: 1.3305
Take Profit: 1.3184, 1.2975
Stop Loss: 1.3390
Key Levels: 1.2975, 1.3184, 1.3306, 1.3611, 1.3794