GBP/USD is currently consolidating around 1.3450 after a 0.6% increase. This rise follows the Bank of England’s surprise decision to cut the policy rate by 25 basis points. More members of the Monetary Policy Committee voted for this cut than expected, which caught the markets off guard. Elliott Wave analysis indicates that GBP/USD is undergoing a correction in a WXY structure. A key level to watch is around 1.3156, where we may see buying interest. The main trend remains bullish, and we anticipate a three-wave bounce from the Blue Box area. We recommend moving stop losses to breakeven as certain retracement levels are reached.

Bank Of England Rate Cut

The Bank of England’s decision to cut rates shows concerns about inflation, despite suggesting that further cuts may not happen soon. Their statement indicates caution, as inflation rates are much higher than their target. In other market news, EUR/USD is trading around 1.1650, impacted by the strengthening US Dollar. Gold prices are stabilizing near $3,400 per ounce, while Bitcoin saw a slight pullback after approaching $118,000. There’s also a list of top brokers for trading EUR/USD, focusing on competitive spreads and effective platforms for 2025. The unexpected rate cut from the Bank of England has created a challenging situation for the pound, with GBP/USD consolidating around 1.3450. This decision, supported by more committee members than anticipated, marks a significant change in the Bank’s focus from fighting inflation to avoiding a sharp economic downturn. This policy shift seems necessary, considering this year’s broader economic data. Recent CPI figures from July 2025 show inflation at a stubbornly high 5.8%, well above the 2% target. Additionally, the second-quarter GDP growth was only 0.1%, raising recession fears and influencing the Bank’s decision, similar to challenges faced after the 2022 inflation spike.

Economic Sentiment And Market Reactions

In the upcoming weeks, we expect economic weakness to exert pressure on the pound. The strong US dollar, supported by a Federal Reserve that aims to keep rates stable, will likely increase this pressure. We are looking for opportunities to short GBP/USD, targeting the key technical level of 1.3156. The 1.3156 area is a crucial support zone where significant buying interest is expected, in line with the Elliott Wave structure. As prices approach this level, we will prepare to close our bearish positions. A bounce from this zone could provide an excellent chance to shift our strategy and open long positions. This cautious sentiment is also evident in other major markets. Gold is holding steady around $3,400, serving as a strong hedge against the stagflation concerns this Bank of England move highlights. The robust US dollar is keeping EUR/USD constrained around 1.1650, confirming a strong demand for the dollar over European currencies. Create your live VT Markets account and start trading now.

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