GBP/USD: BOE to disappoint the hawks, 1.3100 on the cards?

Having faced rejection once again at 1.3250 levels, the GBP/USD pair moved-away from multi-month tops in Asia, as investors turn cautious heading the BOE’s ‘Super Thursday’.

Focus on BOE verdict and QIR

The bulls are seen trying hard to defend 1.32 handle so far this Thursday, as the US dollar regains ground broadly and reverts towards 93 handle, after yesterday’s sell-off to fresh 15-month lows of 92.41.

The US dollar was sold-off into rising geo-political tensions surrounding the new US sanctions on Russia, after the EU Chief Juncker said that it stands ready to retaliate if new US sanctions on Russia if it hurt EU’s economic interests. Also, a slew of Fedspeaks left the USD bulls largely unimpressed.

The sentiment around Cable also remains weighed down by worse-than expected construction sector activity report published from the UK economy.  UK construction PMI hits 11-month lows in July, a big miss on expectations

Meanwhile, a profit-taking slide ahead of the key BOE events cannot be ruled, as markets resort to locking-in gains on their GBP longs after the recent run-up to eleven-month peaks.

The BOE is widely expected to make no changes to its monetary policy settings, although a change in the voting composition will be closely eyed for fresh hints on the rate hike outlook. In its Quarterly Inflation Report (QIR), the BOE is expected to downgrade its growth forecasts, while keeping the inflation forecasts largely unchanged.

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

GBP/USD levels to consider             

At 1.3215, the pair is poised to test next support at 1.3196/92 (Aug 1 & 2 low), below which supports are aligned at 1.3165 (classic S2 & Fib S3) and 1.3138/25 (10-DMA/ Jul 26 high). To the topside, resistances are seen at 1.3250 (psychological levels & multi-month highs), 1.3300 (round figure) and 1.3345 (Sep 12 high).