GBP/USD fluctuates below 1.2300 after the Bank of England (BoE) hiked the policy rate by 25 bps yesterday. Economists at ING expect the pair to test 1.2420 and 1.2500 levels.

BoE hiked but gave very little guidance

“The BoE hiked by 25 bps yesterday. We only got a statement this time and it appears quite clear that the MPC has tried to keep all options open. We strongly suspected the BoE would refrain from offering any real bit of guidance to markets and that would have meant that the impact on the Pound would have been very short-lived. This indeed appears to be the case.”

“We think that a May pause is likely despite the recent rise in inflation: with around 30 bps of tightening in the price, there is room for a repricing lower to favour a modestly higher EUR/GBP.”

“Looking at Cable, the BoE does not appear to be much of a factor, and our view for Dollar downside risks means that the key 1.2420 and 1.2500 levels can be tested quite soon.”