FX.co ★ GBP/USD. The pair at a crossroads: a "dissident" appeared in the Bank of England, the dollar follows geopolitics

The pound paired with the dollar today shows increased volatility: the daily high settled at 1.3210, and the low at 1.3087. This price dynamic is due to several fundamental factors. Firstly, the British currency reacted violently to the results of the Bank of England's March meeting. The central bank, on the one hand, raised the interest rate, thereby continuing to tighten the parameters of monetary policy. But on the other hand, today's meeting revealed a split in the camp of the Monetary Policy Committee. This circumstance exerted the strongest pressure on the pound, which collapsed by more than 100 points in a matter of minutes.

However, the GBP/USD bears were unable to develop success, as the quoted currency - the dollar - also showed a contradictory mood today. Reacting to the external fundamental background, the greenback then strengthens its positions, then surrenders them throughout the market, including paired with the pound. As a result, despite the increased volatility, the GBP/USD pair actually remained in place, stalling in the middle of the intraday price range of 1.3090-1.3210. Traders cannot decide on the vector of further movement, as they are trapped in the grip of contradictory fundamental factors.

So, today the Bank of England continued the cycle of raising the interest rate, once again increasing it by 25 basis points. This is the third consecutive increase since December last year. This fact supported the British currency, despite the fact that this decision was widely expected. However, against the background of geopolitical uncertainty, some experts assumed that the central bank would take a break until May, when the next meeting of the central bank will take place. These fears were not justified: the Bank of England nevertheless decided on another round of rate hikes, although the decision was not made unanimously. John Cunliffe voted against, favoring keeping the rate at 0.5%. The rest of his colleagues supported the next round of tightening monetary policy, but the manifestation of "dissidence" alerted market participants. The lack of solidity (even in such a minimal manifestation) was supplemented by the rather cautious wording of the accompanying statement. The text states that the majority of the Committee members "note the need to tighten policy in order to reduce the risk of sustained inflation growth," however, "the further policy of the central bank will depend on inflation, namely on the dynamics of its growth."

It is worth noting here that the pound has also become a victim of inflated market expectations. On the eve of the March meeting, experts estimated the probability of a 50-point rate hike quite high (35-40%). But the de facto central bank not only failed to meet the "ultra-hawkish" expectations, but also demonstrated a split in the Committee's camp. As a result, the pound fell under a wave of short positions, pulling the GBP/USD pair into the area of the 30th figure (after updating the intraday high at 1.3210).

However, the bears of the pair could not develop success: geopolitics made its own adjustments. Today it was reported that Turkey is ready to hold a meeting between Putin and Zelensky. This was stated by the head of the Turkish Foreign Ministry Mevlut Cavusoglu. In turn, the representative of the Ukrainian delegation at the talks said that the meeting of the presidents could take place "after the completion of work on the agreement, possibly in the coming weeks."

Such an information background reduced the level of anti-risk sentiment, negatively affecting the US currency.

Given the contradictory fundamental picture, it is now difficult to say whether bulls or bears of GBP/USD will be able to take up in their confrontation. On the one hand, the British central bank has declared further steps to tighten monetary policy. On the other hand, the central bank has "tied" this issue to key macroeconomic indicators that will reflect the situation in the country's economy at the time of making a decision. It should be noted here that despite the increase in the consumer price index, the average wage of Brits, adjusted for inflation, decreased in the fourth quarter of last year – for the first time since mid-2020. Salaries in October-December decreased by 0.1% compared to the same period a year earlier, excluding bonuses - by 0.8%. This fact can play the role of a "stop-tap" in the process of raising the rate. By the way, John Cunliffe, who did not support the Bank of England's latest decision, has repeatedly raised this issue in his speeches, pointing out that wages "do not keep up" with inflation.

In addition, the pound is now moving in the wake of the US currency, which in turn is influenced by geopolitical news. That is, there is no need to talk about any stable growth: it is advisable to consider the current situation as a large-scale correction, but nothing more.

From a technical point of view, the pair on the daily chart continues to be between the middle and lower lines of the Bollinger Bands indicator, under the Kumo cloud, but on the Tenkan-sen line. To talk about a trend reversal, bulls need to overcome the middle line of the Bollinger Bands – that is, to settle above the 1.3280 mark. Up to this point, the current price increase can be viewed through the prism of a corrective pullback. The resumption of the downward trend will be signaled by a fall in the price below the 1.3110 mark (the Tenkan-sen line on the same timeframe). In this case, the Ichimoku indicator will form a bearish Parade of Lines signal, which will declare the priority of short positions. At the moment, it is advisable to take a wait-and-see attitude for a pair. As soon as the upward corrective momentum begins to fade (especially if it happens after entering the area of the 32nd figure), sales will "be on trend" again.