The GBPUSD ended the week on a softer note as the pair continues to consolidate between the 1.38 to 1.40 levels after the Bank of England held interest rates steady on Thursday, echoing the US Federal Reserve’s accommodative tone on the prospect of future monetary policy tightening.

The central bank’s monetary policy committee voted unanimously to keep its main lending rate at 0.1 percent and maintain its target stock of asset purchases at 895 billion pounds ($1.2 trillion).

The decision comes as bond yields around the world have risen on expectations of higher inflation and the possibility that central banks will tighten monetary policy sooner than expected. On Wednesday, however, U.S. Federal Reserve Chairman Jerome Powell said the Fed does not intend to raise interest rates until 2023.

In February, the BoE expected growth of 5% in 2021. For now, the recovery is not a given, as the economy contracted by 2.9% in January and is still 9% below its February 2020 level, before the pandemic shock.

Meanwhile, speculation about a rate cut into negative territory is growing and has been weighing on the British Pound. Last month, the BoE said British lenders would need at least six months to prepare for a negative interest rate environment but stressed that it had no plans to deploy such a measure imminently.

For several sessions, the market has been consolidating between $1.40 and $1.3815, so a break of either boundary should kick off the next directional move. An incursion below the 50-period moving average at 1.380 could lead to a deeper correction towards $1.3680. On the flipside a break of the 1.4018 barrier would allow a resumption of the uptrend towards the recent high at 1.4242 and the 2018 highs at 1.4375.

Traders may look to capitalise on the indecision at the start of next week and enter conservative shorts at the current price point with a target of 1.38. Any rejection at that level should trigger a bullish move higher towards the 0.3 Fibonacci retracement mark at 1.39451.

Looking ahead this week on the macro calendar, traders will have the opportunity to react to UK’s labour data on Tuesday and CPI data on Wednesday, both expected to rise slightly.

Support & Resistance Levels:

R3       1.42457
R2       1.40244
R1       1.39451
S1        1.37528
S2        1.36273
S3        1.35000

Analyzed by：Mr. Thibault Moirez，Independent Analyst