GBP/USD tumbles as BOE decision looms, now down to 1.2790

The losses are coming in fast in the last one hour, with GBP/USD falling from 1.2845 to a low of 1.2790 on the day. This is a move tied mostly to the pound

GBP/USD dropped sharply lower in the last hour of trading on Thursday as traders positioned themselves ahead of the BOE rate decision. The pair fell from a high of 1.2845 to a low of 1.2790. This was a total decline of 55 pips.

The pound’s losses were mainly driven by strength in the euro, with EUR/GBP rising by 0.4% to reach 0.8450. This pair is now at its highest level since early February.

The BOE decision is the main event for the pound on Thursday and it will be closely watched by traders. The central bank is widely expected to cut interest rates by 25 basis points, but there is some uncertainty about the vote. Some traders believe that the decision could be split, with a majority voting in favour of a rate cut.

The odds of a 25 bps rate cut are priced in at around 62% at the start of the session, up from 58% earlier.

I had earlier shared some comments on the BOE decision and the potential impact on the pound:

“The central bank is likely to cut the bank rate at the balance, but expectations are for the votes to be either 5-4 or 6-3 in favour of a rate cut. The likely dissenters are Pill, Haskel, Mann, and possibly Greene.

“Naturally, if the BOE doesn’t move with a rate cut today, the decision will be a dovish hold surely. But how will markets take to that?

“Currently, traders are pricing in a ~58% probability of a rate cut. So, therein lies the risk for the pound. It’s pretty much a 50-50 call based on the odds. As such, any decision will result in quite decent price movement as markets readjust their rates pricing.”