GBPUSD has been trading lower on Thursday, at fresh 7-month lows around 1.3125. The pair remains under pressure mainly due to strength in the US dollar which received a boost recently from the hawkish Fed. The pound has lost the important support area 1.3150 and remains vulnerable to further losses.
Today, the Bank of England policy meeting will be in focus. The central bank could drive the sterling even lower or open the way to a corrective recovery from oversold territory. Should the regulator confirm that the Q1 growth slowdown was temporary, it will be a bullish sign for the pound. The pair could even rally if Carney shows a greater willingness to hike rates in H2 2018. However, such a scenario is probably too optimistic as the monetary authorities will likely express a more cautious tone.
A potentially neutral rhetoric may leave the pound virtually unfazed. But from the technical point of view, the pair has a recovery potential as it has been trading at very attractive levels for the bulls to get into the game. The immediate resistance lies around 1.3180. On the downside, the 1.31 figure is now the key support. A break below will open the way to a deeper downtrend.
By Helen Rush
Senior Analyst at Capital Markets