Daily Market Recap – GBPUSD Bank of England keeps monetary policy unchanged

The Bank of England left its key rate and the amount of its asset purchase program unchanged Thursday after its monetary policy meeting. The BOE's key interest rate was kept at 0.1%. The size of the British central bank's asset purchase program remains at £895 billion, including £875 billion of government bond purchases.

The decision comes as the U.K. has seen inflation accelerate in recent months and the country's economic recovery, aided by the reopening of many industries, is threatened by a spike in Covid-19 cases due to the Delta variant.

However, inflation will continue to rise in the country, temporarily reaching 4% year-on-year in the fourth quarter, according to BoE estimates. Thus, a modest adjustment in monetary policy is likely to be necessary to be in line with the sustainability of the medium-term inflation target.

The BoE also announced that it was maintaining a forecast for economic growth of 7.25% for this year but raising its GDP forecast to 6% for 2022 from the previous estimate of 5.75%.

The GBPUSD has been in a well-established uptrend within a channel for several months. However, the pair has entered a consolidation phase in a range between $1.4250 and $1.3680. For the time being, buyers are keeping the upper hand and prices have come to bounce off the lower bound of the rectangle. Thus, a new rotation of the prices towards the high limit at $1.4250 would not be excluded in the weeks to come. Of course, only the break of one of the two bounds will kick off the next directional move.

In the short term, a break of $1.3915 should give the market a new impetus to reach the next resistance levels at $1.4080 and $1.4250. Moreover, a breakout from the top of the range would lead the pair to new yearly highs in the direction of $1.4565.

(Chart Source: Tradingview 05.08.2021)

On the other hand, support at $1.3680 coupled with the 50-period moving average and the lower bound of the channel is a major level for buyers to defend. A break below this key level would not bode well for the future. It would risk weakening the bullish momentum and the pound could start a corrective move towards $1.3350.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.