GBP/USD remains at daily lows, unable to recover

The pound is consolidating losses across the board, as it remains unable to make a sustainable recovery. Cable extended losses after the release of the decision and the inflation report from the Bank of England. It bottomed after the beginning of the American session at 1.2525, the lowest in two days. 

Earlier today, GBP/USD reached at 1.2705, the highest in seven weeks. From there, it fell more than 150 pips. During the last hours, cable remained below 1.2570, unable to make a recovery despite USD weakness. 

BoE: higher growth prospects but not a hawkish tone

Today the BoE, as expected, left monetary policy unchanged. It revised upward its growth proyections. “Although the Bank recognized that it had over-estimated the negative impact on confidence (and so consumer activity), it remains concerned that the inflation impact from GBP’s fall will impact consumption as wage rises are outpaced by price rises”, said analysts from Westpac. 

According to them, the net effect was that markets realized that Carney and the MPC were not adopting a more hawkish tone and remained vigilant to downside risks.

GBP/USD levels to watch

“Two pivotal supports at 1.2535 and 1.2500 (trendline support of bull-channel from 1.1986 - 16 Jan low) are in focus and firm break here would generate stronger bearish signal”, said Slobodan Drvenica from Windsor Brokers Ltd.

The bearish scenario would look for extension towards strong support at 1.2430, added Drvenica. “Otherwise, fresh upside attempts could be expected while 1.2535 handle holds. Upper triggers lay at 1.2600 and 1.2640, with break of the latter needed to neutralize downside risk.”