Daily Market Analysis By FXOpen

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GBP/USD Analysis: Pound Recovers After the Bank of England Decision

Yesterday, the Bank of England published its interest rate decision. According to ForexFactory, the votes were distributed as follows:

→ rate hike - 0 votes, cut - 2 votes, unchanged - 7 (0 - 2 - 7);

→ forecast: 0 - 0 - 9;

→ previous values: 0 - 1 - 8.

For the first time in the current cycle of interest rate hikes aimed at inflation lowering, two members of the Monetary Policy Committee voted in favour of the rate cut. The dovish tone was echoed by Bank of England Governor Andrew Bailey: “It is likely that we will need to cut the bank rate over coming quarters, possibly more so than is currently priced into markets.”

The market's first reaction to the clear signals of the imminent easing monetary policy was the weakening of the pound, including against the US dollar. Thus, yesterday, the GBP/USD rate dropped below the low of April 26 at around 1.245.

However:

→ the US dollar is also affected by the prospect of the Fed's easing monetary policy because the current tight policy puts pressure on the labour market - according to data from May 9, the number of applications for unemployment benefits in the US was the highest since November 2023;

→ Today's UK GDP data (which turned out to be better than expected) supported the pound.

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WTI Oil Price Recovers Quickly From March Lows

On May 8, the price of WTI crude oil fell below $77 per barrel for the first time since March 11. But on the morning of May 10, it was above $79 – an increase of almost 3% in less than two days.

Several factors contributed to the significant rise in the price of WTI crude oil. According to Reuters, among them:

→ Increased oil demand from the United States. Data released on Wednesday showed a drop in US crude oil inventories, driven by increased refinery utilisation.

→ Growing demand from China. Data published on Thursday showed an increase in oil imports.

→ Ongoing concerns about possible supply disruptions due to escalating conflict in the Middle East. Negotiations to end hostilities between Israel and Hamas failed, and Israel attacked the Palestinian city of Rafah.

On April 19, we wrote about the possibility of a bearish breakdown of the ascending channel line, which would be welcomed by the US administration, where the presidential elections are getting closer and closer.

Since then, the price of oil has broken down the median line and the support line at $80.70, which may act as resistance in the future.

TO VIEW THE FULL ANALYSIS, VISIT FXOPEN BLOG

Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only (excluding FXOpen EU). It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.