GBP/USD set to test the 1.21 level – TDS

The Bank of England voted 5-4 in favor of keeping the Base Rate unchanged. The surprise hold has caught GBP off guard. Economists at TD Securities analyze Sterling’s outlook.

The BoE's move and cooling inflation provide a green light for GBP to lag on the crosses

In a very close vote, the MPC opted 5-4 for a ‘hawkish hold’, threatening more hikes if inflation further surprises to the upside. We think, however, that constructive price dynamics will leave the BoE on hold from here, with Bank Rate at 5.25% until May 2024.

GBP/USD opens up a move to 1.21 here, but we also think GBP slides on the crosses.