GBP/USD has lost its bullish momentum following Wednesday's rally. The British pound's fate depends on the Bank of England's policy decisions and the pair could test 1.22 if there is a hawkish surprise, FXStreet’s Eren Sengeze reports.

Pound could attack 1.22 on a hawkish BoE surprise

“Markets expect the bank to hike its policy rate by 25 basis points (bps) to 1.25% in June. In case the vote is unanimous on such a rate increase, this could be seen as a dovish development and cause the British pound to suffer losses against its rivals.”

“If the press release unveils that three or four policymakers have voted for a 50 bps hike, the initial reaction is likely to fuel a leg higher in GBP/USD. A surprise 50 bps hike should also boost the sterling.”

“The BoE could acknowledge the worsening economic outlook and refrain from committing to further aggressive tightening moves in the future. In that scenario, GBP/USD is likely to come under renewed bearish pressure even if the vote split were to point to a hawkish rate outlook.”

“In case the 1.2120 support fails, additional losses toward 1.2050 (static level) and 1.20(psychological level) could be witnessed.”

“Stiff resistance is located at 1.22 (Fibonacci 38.2% retracement). A four-hour close above that level could be seen as a bullish development and open the door for an extended rebound toward 123 (Fibonacci 50% retracement) and 1.2350 (50-period SMA).”

See – BoE Preview: Forecasts from nine major banks, hikes to continue until inflation improves