On Tuesday, the GBPUSD pair declined from the levels beyond the key 1.30 mark and closed the day with losses in the 1.2895 region. Today, the major attempted to recover and came closer to the 1.2950 area, however an unexpected move from the Bank of England checked the pair’s rise.
On Wednesday, the UK central bank surprised markets by a sudden interest rate cut from 0.75% to 0.25%. The decision was made ahead of the monetary policy meeting scheduled on March 26. The bank seemed to have joined the ‘easing’ tendency and followed the Fed’s suit. The reduction in the bank rate was delivered in response to a possible coronavirus impact on the economy and is aimed at supporting businesses, backing up consumer confidence and bolstering cash flows of companies and households. On the announcement, the British Pound faltered and dropped to the 1.2867 mark.
However, as coronavirus continues its march all over the globe – the number of infected people rose to 120,000 worldwide with the death toll climbed to 4,200 – risk-off returned to markets, and risk assets got pressured once again. Amid the dramatic situation in Italy, where the virus took lives of 168 more people raising the death toll to 631 many flights were canceled. Meanwhile, Spanish authorities decided to close schools. On the news, the US equity futures and Treasury yields declined and dragged the US Dollar to the red zone. The weak DXY impeded the major’s further fall, and GBPUSD managed to rebound to the 1.2930 area.
Today, the UK publishes a bunch of macroeconomic data including the Industrial Production, the Trade Balance, the Manufacturing Production and the GDP figures. All these may influence the major dynamics. However, investors refrain from placing aggressive bets and prefer to wait-and-see ahead of the first post-Brexit budget report.
From the technical point of view, the GBPUSD pair sits in the daily range of 1.2846-1.2938 and challenges its SMA200 (today at 1.2900) on the one-hour chart. The major will likely maintain its bullish stance unless it sustainably breaches the SMA200 H1. The resistance is seen at 1.3066, 1.3221 and 1.3313 while the support is at 1.2819, 1.2727 and 1.2572.