The GBP has been bearish since the beginning of the year and continues to remain so, despite numerous rate hikes from the Bank of England on every meeting since December last year. That hasn’t helped the GBP, although the pace of rate hikes from the BOE has been slow compared to the FED, not that stronger hikes have been helping with inflation. We saw a bullish attempt earlier today, but the buying pressure stopped at the 20 SMA (gray) on the H4 chart, which seems like a good place to sell GBP/USD .

GBP/USD H4 Chart – The Selloff Continues

The 20 SMA has turned into resistance on the daily chart 

Bank of England Interest Rate Decision

• BOE raises bank rate by 50 bps to 2.25%, as expected
• Prior interest rates were 1.75%
• Bank rate vote 9-0* vs 9-0 expected (*Haskel, Mann, Ramsden voted for 75 bps, Dhingra voted for 25 bps)
• Sterling has depreciated materially since August
• Uncertainty around the outlook for UK retail energy prices has fallen after government’s energy support plan
• Consumer spending is likely to have peaked in this quarter
• Peak inflation is now likely to be lower than projected in August, at just under 11% in October
• Policy is not on a pre-set path
• Should the outlook suggest more persistent inflationary pressures, including from stronger demand, BOE will respond forcefully, as necessary
• Full statement

There’s a bit of give and take in the latest policy decision by the BOE here. The split in votes obviously doesn’t help to give markets a sense of confidence in their resolve to tighten aggressively. Add that to the fact that market pricing had considered a 75 bps rate hike but we only got 50 bps, as per what economists expected.

But the good news comes from the fact that the BOE is offering up a more optimistic outlook on inflation. As for economic activity, they see Q3 GDP as being -0.1% q/q and that will infer a technical recession in the UK. But on the balance of things, the brighter inflation outlook perhaps matters more as they view peak inflation to be lower now.