Sterling Falls Drastically Ahead of U.K.’s Interest Rate Decision, 50+ PIP Volatility Likely in GBP Parity; Feb 04, 2021

U.K. Interest Rate Decision

U.K. is going to release Cash Rate decision (1200 GMT/1730 IST) followed by BOE Gov Bailey’s speech. Short term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future. MPC members vote on where to set the rate. In addition, monetary policy summary contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.

Today is the first meet after successful Brexit. There is no hidden fact that economy is still very weak; severely faces trade as well as new covid variant issue. BOE has no new plans to fight with the current scenario but they have been putting emphasis on the negative interest rates for the past few months. BOE is still facing many issues with cutting the interest rate below zero. On the other hand, there is a possibility that U.K. PM Johnson may ease national lockdown soon. If BOE Gov maintains the same tone, the sterling likely to strengthens.

Let’s see how GBP has reacted during the previous data release:

Dec 17:

Nov 05:

Technical View:

GBP/USD: The sterling weakens sharply ahead of U.K.’s monetary policy and Interest Rate Decision. The pair made intraday high at $1.3652 and low at $1.3572 mark. On a H1 chart, both RSI and triple EMA confirms the bearish trend but on a Day Chart triple EMA still suggests bullish trend in a long run. A sustained close below $1.3580 will check key supports. Alternatively, reversal from here will take the parity back above $1.3620 mark.

Key Resistances: $1.3620, $1.3641, $1.3682, $1.3701

Key Supports: $1.3565, $1.3520, $1.3490, $1.3450

Take a look and do trade wisely!
Good Luck