BoE Poised for Another Rate Cut to 4.25%, but Caution Signals Grow Louder

Summary

• Current Price: Approaching 1.2450 support
• Trend: Bearish-to-Neutral
• Resistance: 1.2540, 1.2620
• Support: 1.2450, 1.2380, 1.2300

GBPUSD trades cautiously ahead of the Bank of England's rate decision, with markets fully pricing in a 25 bps cut to 4.25%. The pair remains pressured, with downside risk toward 1.2380 if the BoE strikes a dovish tone. A surprise hold or a cautious message could trigger a short-term rebound above 1.2540.

Fundamental Factors Affecting GBP

1. BoE Rate Cut Expected – Fourth Since August
   • Economists forecast a 0.25% cut to 4.25%, with an expected 8-1 vote split.
   • Inflation eased faster than expected in March to 2.6%, giving the BoE more space to act.
2. Market Fully Priced for Cut
   • Investec economist Sandra Horsfield says the cut is a "near-certainty."
   • Financial markets have already priced in the move, meaning immediate reaction may be muted unless guidance surprises.
3. Caution Flags from Former Policymakers
   • Some experts warn against cutting rates too quickly, citing the risk of re-igniting inflation or undermining credibility.
   • With UK wage growth still sticky and core inflation above target, the BoE may adopt a measured tone even if it cuts rates.

Key Takeaway for Traders

The rate cut itself is not the story—forward guidance is. If the BoE signals that further cuts will be data-dependent or gradual, the GBP could stabilize or bounce modestly. However, if the messaging is more dovish than expected, GBPUSD could extend losses toward 1.2300.

GBPUSD – H4 Timeframe

The bullish break of structure on the 4-hour timeframe chart of GBPUSD was followed by a quick retracement, which has now reached a critical level. The price action is currently consolidating within a channel pattern, further increasing the likelihood of a sustained reaction of the demand zone.

GBPUSD – H3 Timeframe

The price action on the 3-hour timeframe chart of GBPUSD shows that the highlighted area of demand overlaps the 80% Fibonacci retracement level. The recommended approach for this trade is to wait for a break above the resistance trendline of the descending channel, using the origin of the breakout impulse as the entry point.

Analyst's Expectations: 

Direction: Bullish

Target- 1.34369

Invalidation- 1.32015

CONCLUSION

You can access more trade ideas and prompt market updates on the telegram channel.