At this policy meeting, the nine members of the Bank of England’s Monetary Policy Committee voted 8 to 1 to keep the base rate unchanged at 3.75 per cent, with only Chief Economist Hugh Pearle favouring a rise to 4.0 per cent. The final vote was broadly in line with the outcome predicted by a previous Reuters survey of economists. The market had originally anticipated a unanimous 9-0 vote to keep rates on hold, which, had it materialised, would have signalled a more dovish stance. However, the fact that a minority of officials favoured a rate hike reflects that concerns within the Bank of England regarding the stickiness of inflation have not yet subsided. Jessica Hinz, Head of the Economic Team at Fitch Ratings, noted that the Bank of England is currently in a typical wait-and-see phase. The core reason for this is that the Monetary Policy Committee needs to continuously assess the impact of geopolitical conflicts in the Middle East on the UK economy. The Bank must constantly strike a policy balance between curbing inflationary stickiness, stabilising economic growth and safeguarding the labour market; policy-making has become even more cautious, particularly against the backdrop of gradually slowing domestic wage growth.

Despite the sharp fall in oil prices caused by the conflict in the Middle East, the labour market remains in a ‘low-hiring, low-layoff’ pattern. However, economists warn that disruptions to shipping through the Strait of Hormuz have pushed up prices of other commodities, including fertilisers, petrochemicals and aluminium, creating downside risks. The current stability in the labour market underpins financial markets’ expectations that the Federal Reserve will keep interest rates unchanged this year. On Wednesday, the Federal Reserve kept its benchmark overnight interest rate in the 3.50%–3.75% range, citing heightened inflation concerns.

On the daily chart, the GBP/USD pair shows Bollinger Bands widening upwards and moving averages diverging upwards, indicating that the overall upward trend remains intact. The MACD has formed a ‘Kiss of the Angels’ pattern, suggesting that although upward momentum has weakened, the pair is likely to resume its upward movement following a pullback. The RSI stands at 62, with market sentiment predominantly bullish. On the four-hour chart, the Bollinger Bands are widening upwards and the moving averages are diverging upwards, whilst the MACD fast and slow lines continue to trade above the zero line. The RSI stands at 68, indicating an optimistic market sentiment. The recommended strategy is to buy on dips.

Trading Direction: Buy

Entry Price: 1.355

Target Price: 1.4

Stop-loss Price: 1.32

Support Levels: 1.34, 1.33, 1.3

Resistance Levels: 1.37, 1.38, 1.41