Pound Sterling is holding steady, not impacted by the Bank of England’s choice to keep the interest rate at 4.25%. The market is reacting to a 7-3 vote split, showing differing views among policymakers. In the past, voting patterns varied as officials dealt with challenges like tariffs. Many had expected a shift toward a neutral or softer stance, especially since the BoE’s Chief Economist has joined those calling for a rate cut.

Potential GBP Strength Drivers

Analysts believe that any strength in the GBP is likely due to a weakening USD rather than any real strength in the pound itself. Recent trading shows GBP/USD testing a critical support level at 1.3390, marked by the 50-day moving average. If this support level fails, we could see a trend change. Current market uncertainty is reflected in recent candlestick patterns, with expected trading ranges between support at 1.3380 and resistance at 1.3480. This suggests that the currency’s apparent resilience may not be as strong as it seems. The 7-3 vote split within the Monetary Policy Committee indicates a divided central bank. The addition of a third member supporting a rate cut has shifted sentiment. Huw Pill’s inclination towards a cut, despite his previous caution, suggests a change in the monetary policy discussion. When voices known for moderation hint at lower rates, it’s a sign to pay attention. From our view, the pound’s current standing is more affected by external factors than any internal strength. The US dollar is driving the pair’s movement, while changes in UK fundamentals remain minimal. Thus, any weakness in the dollar provides a temporary lift to sterling, not vice versa. This calls for caution—it’s not wise to rely solely on momentum without strong price backing.

Technical Considerations

Technically, we are still hovering around key levels. With 1.3390 holding strong, downside pressure is limited. Price movement has shown lower volatility, and the tightening near support indicates that a clear directional bias is not yet ready to emerge. If we break below the 1.3380 mark, it could lead to deeper lows—levels not seen since earlier this quarter. Increased momentum below that point could lead to a more extensive decline. Conversely, a significant upward movement would need to break through 1.3480 convincingly. This is not a simple task, especially with limited fundamental support. The market appears uncertain, with narrowing price ranges and hesitant candlestick patterns. From a risk-reward angle, trades at the edges should only be made with solid volume confirmation—otherwise, it becomes a gamble. As traders, it’s vital to act deliberately. Avoid rushing in just because the policy outlook is changing or news is leaning one way. The signals remain unclear. Both interest rate expectations and overall risk sentiment need to align more clearly before making any commitments. For now, being reactive rather than predictive is likely the best strategy to protect capital. We’re opting to wait for a clear breakout. Create your live VT Markets account and start trading now.

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