• The Bank of England held rates on Thursday.

• UK inflation fell from 4.0% in January to 3.4% in February.

• There is a 75% chance that the Bank of England will cut rates in June.

The GBP/USD outlook soured as the pound’s decline deepened following the BoE’s rate cut signal. The Bank of England held rates on Thursday and said conditions might soon allow the central bank to start cutting rates.

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For months, the pound has benefitted from the view that the BoE would be among the last major central banks to cut rates. However, that view has changed, and the currency is falling. Britain has had much higher inflation than most major economies. Consequently, the BoE has remained hawkish as other central banks prepare to cut rates.

However, data on Wednesday revealed a more significant than expected decline in inflation in February. Inflation fell from 4.0% in January to 3.4% in February. As a result, there is no more reason for the BoE to remain hawkish. Most hawkish policymakers became more neutral at the policy meeting, agreeing to hold current rates. Consequently, there was an increase in rate-cut bets. Currently, there is a 75% chance that the Bank of England will cut rates in June, an increase from 65% before the meeting.

Meanwhile, the Fed was also dovish at the policy meeting on Wednesday, maintaining its outlook for rate cuts. Markets expect the first Fed cut in June. Moreover, Powell kept his forecast for three rate cuts in 2024. 

Moving forward, investors will focus on which side will be more dovish as central banks move closer to rate cuts. Additionally, they will focus on the expected size and pace of rate cuts. 

GBP/USD key events today

• Euro Summit
• Fed Chair Powell Speaks

GBP/USD technical outlook: Key support broken

On the technical side, the GBP/USD price has broken below a major support trendline to make a lower low. Moreover, the price has broken below the 1.2650 key support level, pushing well below the 30-SMA. The RSI is trading near the oversold region, showing strong momentum in the decline.

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Notably, bears showed the first sign that they were ready to take over when the price made a lower high near the 1.2800 key resistance level. They confirmed this new direction when the price broke below the previous low. Therefore, the price might soon retest the 1.2550 key support level.

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