Ahead of the Bank of England’s interest rate decision and the accompanying comments from the Monetary Policy Committee, GBP/USD spent most of the day floating above $1.6950, only half-heartedly threatening to break above the psychological $1.70 level.
Since the announcement, however, the currency pair has dropped, and for the time being looks unable to clear the hurdle in front of it. Next week will see the Bank of England issue its inflation report, which might be the catalyst that currency traders are watching out for.
With stimulus to GBP/USD from the BoE being minimal, it now falls to the US to kick the currency cross into a move. If yesterday’s testimony in front of the Joint Economic Committee by Janet Yellen is anything to go by then we are likely to witness another session of verbal dodgeball from the Federal Reserve chair when she sits down in front of the Senate Budget Committee today.
The $1.7000 hurdle that GBP/USD is trying to clear dates back to August 2009, and, although the move to date has been strong, it might well take more than just the current momentum to clear this. Traders should be wary that if this level is broken it could trigger a plethora of stops squeezing it even higher.