After the meeting of the central bank of England yesterday, the pound currency experienced significant depreciation until the end of the trading session in New York.
The results of the meeting met the forecast when the Bank of England (BOE) raised interest rates by 50 basis points to 4.00%. But why is the value of the Pound plummeting?
This is because the BOE has signaled that monetary policy tightening measures are likely to be stopped in the middle of this year.
This adds more pressure in addition to the International Monetary Fund's (IMF) warning that the UK economy will decline in 2023.
Thus, the Pound is expected to continue to trade weakly in addition to the surprise strengthening of the US dollar in the New York session yesterday, which has buried most major currencies including the Pound.
The price chart of the GBP/USD currency pair saw a daily drop of around 170 pips yesterday and gave a bearish signal after the price moved below the Moving Average 50 (MA50) barrier level on the 1-hour time frame.
After the FOMC meeting, the price was initially seen to jump to the 1.24000 level which still remains a resistance zone for the price.
The price then plunged from the zone and broke through the support at 1.23000 until reaching around 1.22300 at the close of trading in the New York session.
The decline continued at the opening of the Asian session this morning (Friday) but at a slower pace and was seen hovering above the 1.22000 buoyancy zone.
Further decline is expected to break through 1.22000 before heading to around 1.21000.
However, it is likely that a change in price direction could occur again with the focus shifting to the United States (US) NFP jobs report tonight.
If an increase occurs, the price that made the increase will be seen to test the level of 1.23000 and if it succeeds in breaking through, the bullish price signal will be assessed.
The next higher increase will continue again to reach the resistance zone of 1.24000 yesterday.
