GBP/USD refreshes daily tops post-BoE, retreats a bit thereafter

• GBP/USD held on to its intraday gains and refreshed daily tops after the BoE policy decision.
• The mention of negative rates in the policy statement capped any further gains for the major.

The GBP/USD pair shot to fresh session tops, around the 1.3945 region after the Bank of England announced its policy decision, albeit quickly retreated few pips thereafter.

As was widely expected, the BoE left its monetary policy settings unchanged, keeping interest rates and Asset Purchase Facility unchanged at 0.1% and £895 billion, respectively. However, the fact that there was only one MPC member, Michael Sanders, who dissented on the QE vote was seen as a key factor that provided a modest lift to the British pound.

In the accompanying monetary policy statement, the UK central bank showed readiness to implement negative rates if needed. The BoE further added that it doesn't mean that a negative rate is the preferred policy. Nevertheless, the talk of negative rates turned out to be a key factor that held bulls from placing aggressive bets and capped gains for the GBP/USD pair.

On the other hand, the US dollar remained supported by the overnight hawkish comments from Fed Vice Chair Richard Clarida, signalling a move to taper bond buying later this year or early 2022. Adding to this, Clarida noted that conditions for a rate hike could be met in late 2022, which, along with an uptick in the US Treasury bond yields, extended some support to the USD.

The GBP/USD pair, so far, has managed to hold its neck above the 1.3900 mark as market participants now look forward to the BoE Governor, Andrew Bailey's remarks at the post-meeting press conference.

Technical levels to watch