People visiting the Bank of England in London, UK. Image source: ©Claudiodivizia © 123RF.com
The Monetary Policy Committee (MPC) of the Bank of England expectedly maintained the near-negative Official Bank Rate unchanged at 0.10 per cent. The pound initially surged following the publication of the policy decision, but then the GBPUSD promptly retraced from the initial peak.
The cable continues to be consolidating within the boundaries of an intermittent range before the directional price action can be resumed.
GBPUSD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the hourly chart above, the GBPUSD probed the lower boundary of the Distribution Area in the wake of the policy decision but then retraced back. Nevertheless, this uptick was created following an initial dropdown to 1.38600.
The last candle's massive lower tail indicates uncertainty in the market and strong buying pressure just below the 100-day MA (in blue). The price action also appears to be strengthening above the 50-day MA (in green), which serves as a floating support.
The rebound from the ascending trend line indicates that the GBPUSD is not yet ready to resume falling as the bulls retain control in the short term. At the same time, the consolidation below the Distribution Area implies that bullish commitment is not sufficient enough to initiate a new upswing.
The prevailingly neutral market momentum is underpinned by the MACD indicator. Overall, the price action is likely to continue consolidating between the ascending trend line and the Distribution Area in the near future in an increasingly more pronounced bottleneck.
An eventual breakout/breakdown away from the two would elucidate the next likely direction for the market.
Changing outlooks amongst MPC's members
While it was no big surprise that the Committee decided to keep the total envelope of the Asset Purchase Facility unchanged at 895 billion, the big news is that this was not a unanimous decision.
The Monetary Policy Committee voted unanimously to keep interest rates at 0.1% and by a majority of 8-1 to maintain the amount of quantitative easing at £895bn.https://t.co/QWJDoHlg4v #MonetaryPolicyReport #BankRate pic.twitter.com/9LenVPxvpe
— Bank of England (@bankofengland) May 6, 2021
One member of the Committee voted in favour of scaling down the total amount of UK government bond purchases. The motivation behind this decision can be found in the robust recovery that is being observed in the UK.
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