A dovish interest rate raise and weak economic prospects are putting pressure on the British pound!
Daily changes of more than 1% in the Forex market are very rare. However, during today's session the pound is losing more than 2% against the US dollar. GBPUSD pair lost ground and broke below major support at 1.2500. Let us recall that today the BoE raised interest rates by 25 bp to 1%, a level unobserved since 2008. However, this move was treated by investors as dovish. UK inflation is at its 30-year high, but coincides with an economic downturn. The BoE i expects zero economic growth in the second quarter, and a decline in GDP in the fourth quarter. Moreover, the central bank does not expect any significant economic growth within the next 1.5 year, and does not rule out an economic slowdown. BoE's Bailey points out that hikes rates will continue, but probably at a slower pace. The weak economic outlook and mixed interest rate expectations are causing a total sell-off of the pound.
Source: xStation5
