GBP/USD reverses from 11-month tops of 1.3265 ahead of BOE

GBP/USD failed to sustain at higher levels and eased below mid-1.32s, as the bulls turn cautious and await the BOE outcome for the next direction.

GBP/USD: 1.3100 or 1.3300 on BOE?

The spot keeps its bid tone intact, although retraces a quarter of upbeat UK services PMI inspired rally, as focus shifts to the BOE ‘Super Thursday’ due out shortly, which could spur a lot of market volatility. 

Cable’s steady recovery received fresh boost from a sharp turnaround displayed by the UK’s services sector activity, with the PMI rebounding from 4-month troughs reached in June. UK services PMI rebounds beyond expectations in July

Ahead of the BOE events, the GBP/USD pair should enter a phase of upside consolidation, as markets are divided on their expectations on BOE’s MPC voting composition, while from the BOE is expected to keep the policy unchanged.

However, in the wake of downbeat UK Q2 GDP figures combined with an unexpected drop in the inflation, the votes in favour of a rate hike are likely to reverse. Hence, markets could read such a move as less hawkish, weighing down heavily on the British currency.

BOE to maintain optionality on a rate rise should momentum improve in H2 – Goldman Sachs

GBP/USD levels to consider             

Karen Jones, Analyst at Commerzbank noted: “GBP/USD up move remains intact but….. GBP/USD is extremely close to the 50% retracement at 1.3255 and we now have a 13 counts on the daily, 60 and 240 minute charts and the near term risk is for initial failure. Above 1.3255 we have TD resistance at 1.3311 and the 1.3446/1.3502 September 2016 high and the 2009 low. But we are cautious and would prefer to buy the dip. It has a near term uptrend at 1.3047 and 20 day ma at 1.3043, while above here it is bid.”