• GBP/USD met with a fresh supply after the BoE hiked interest rates by 25 bps, as expected.
• Rising US bond yields, the risk-off impulse underpinned the USD and further exerted pressure.
• A break below the 1.2000 mark is needed to confirm a fresh breakdown and any further losses.

The GBP/USD pair witnessed some selling during the mid-European session and dropped to a fresh daily low, around the mid-1.2000s after the Bank of England announced its policy decision.

As was widely expected, the UK central bank decided to hike interest rates for the fifth consecutive time to curb soaring inflation. The nine-member Monetary Policy Committee (MPC) voted 6-3 for the 25 bps hike in the bank rate from 1.0% to 1.25%, with the minority voting for a 50 bps increase.

In the accompanying policy statement, the BoE noted that it was ready to act "forcefully" to stamp out dangers posed by the persistent rise in inflationary pressures. This suggested that the central bank would opt for a more gradual approach amid recession fears and weighed on the British pound.

On the other hand, a combination of factors assisted the US dollar to regain positive traction and reversed the post-FOMC losses. A fresh leg up in the US Treasury bond yields, along with the risk-off impulse, underpinned the safe-haven buck. This exerted additional pressure on the GBP/USD pair.

With the latest leg down, spot prices have eroded a part of the overnight goodish recovery gains. That said, the lack of a significant selling warrants caution for bearish traders. Hence, it will be prudent to wait for a sustained break below the 1.2000 psychological mark before positioning for further losses.

Technical levels to watch