GBPUSD Reached Its Lowest Level Since January2017
Publish Date : 2019/08/01 - 06:45

GBPUSD fell to its 31-month low of 1.21 at the Asian session. The US dollar picked up a bid as the US Federal Reserve cut interest rates by 25% on Wednesday, but cautioned markets against expecting further easing over the next few months.

The Bank of England is expected to take no action against expectations of lower interest rates for the time being, although the risk of hard brexit has dimmed the economic outlook. The Bank of England's Monetary Policy Committee is also expected to vote 0 to 9 to keep the interest rate at 0.75%.The pound will likely pick up a bid if the Bank of England announces again in May that if the economy grows as forecast, markets do not expect the Bank to raise interest rates.

The central bank, however, has little room to sound hawkish with lingering Brexit risks. New Prime Minister Boris Johnson has said that he will take Britain out of the European Union on Oct. 31 without a Brexit deal if Brussels does not rewrite the deal it signed with Theresa May, according to Reuters.

That said, with the GBP already at 2.5-year lows, the BOE would want to avoid sounding too dovish, as that could yield a bigger slide in the British currency, leading to a sharp rise in imported inflation.

All-in-all, the BOE is likely to adopt a more neutral stance.

The GBP/USD pair is currently trading at 1.2128. The key support at 1.1905 could come into play if the US treasury yields rise in response to the not-so-dovish Fed and if BOE's guidance on responding to possible no-deal Brexit is strongly dovish.

source : Fxstreet

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