British Pound falls vertically after BoE leaves interest rates unchanged at 3.75%

The British Pound (GBP) struggles near late July lows as an aggressive Federal Reserve (Fed) strengthens the US Dollar (USD) ahead of the Bank of England (BoE) meeting. Traders are waiting for the BoE's decision before making any directional bets, with policymakers expected to maintain interest rates steady at the September meeting.

A focus on forward guidance and rising energy prices due to the ongoing Middle East conflict is anticipated. Market participants currently price an 80% chance of a rate hike in November, but the overall outlook will play a key role in influencing GBP and providing some impetus to GBP/USD pair. MUFG/BTMU expects the BoE to deliver a "fairly hawkish hold" at tomorrow's meeting, signaling a potential rate hike in November if energy pricing remains elevated.

Despite this, a majority of the Monetary Policy Committee (MPC) is likely to believe in a "wait-and-see" approach, even as the Committee keeps the door open to further tightening later in the year. The US Dollar (USD) consolidates near its highest level since late July and offers support to the currency pair. However, the Fed's hawkish stance and Middle East tensions favor USD bulls, keeping a lid on any significant recovery for GBP/USD.

The US central bank raised the policy rate by 25 basis points (bps) on Wednesday, as expected, and signaled a follow-up move by the end of the year. The path of least resistance for GBP/USD remains to the downside, with any recovery attempts likely to be sold into. Technical analysis indicates a bearish near-term bias below the 200-day Simple Moving Average (SMA) at 1.3454, with spot prices slipping under the 38.2% Fibonacci retracement area and remaining capped beneath the 50% Fibo and 100-SMA confluence.

Immediate support can be found at the 61.8% Fibo retracement at 1.3346, followed by a deeper floor near 1.3256 and the prior cycle low around 1.3141.