The Bank of England (BoE) hiked interest rates by 25 bps to 1.25%, as was widely anticipated. The pound initially declined but then rallied when the market re-read the MPC statement about some 'forceful' adjustment in policy. Looking ahead, economists at ING expect GBP/USD to move within a 1.22-1.23 range.

Market pricing of the Bank rate at year-end rose to 3.00%

“Despite only hiking 25 bps yesterday, market pricing of the Bank rate at year-end rose to 3.00% from 2.84%! It seems the BoE is not in the mood to fight this market pricing at present and the next big opportunity only comes at the 4 August MPC meeting.”

“Cable could sink into a 1.22-1.23 range for the time being.”