Sterling traders are expecting a busy London session on Thursday with the Bank of England widely expected to raise interest rates by 25 basis points to 4.00% tomorrow, its first hike since August 2023, as inflation remains persistently high. UK inflation has climbed to 3.5%, driven largely by elevated energy prices following the Middle East conflict, and the market is anticipating a 7–2 MPC vote in favour of tightening.
However, the real focus for traders will be on the MPC’s forward guidance and Governor Andrew Bailey’s subsequent press conference. Markets are pricing in another three to four hikes during 2027, and traders will be looking for indications of whether policymakers believe that level of tightening is justified. A more hawkish outlook could see the pound push higher, while any suggestion that tomorrow’s hike may be followed by a prolonged pause, especially with another potential Middle East peace deal in the offing, could see it fall both against the dollar and on the crosses.
Cable if looking primed for a good move on the update, having risen off annual lows in the last few weeks it is not sitting back in the middle of recent ranges and any surprise from the MPC will open up the opportunity for a big move. That move is likely to come from how hawkish the committee come across in the voting, statement, policy report and subsequent press conference. Anything that looks to confirm more hikes coming in 2027 should see recent highs break and the pair look to challenge long term resistance on the daily chart near 1.3600, while a more cautious path forward could see a retreat back towards support levels.
Resistance 2: 1.3606 – Long Term Trendline Resistance
Resistance 1: 1.3450 – November High
Support 1: 1.3174 – Long Term Trendline Support
Support 2: 1.3132 – 2026 Low
