Considering short-term supply-demand drivers of major currencies, the main role can be given to the factor of market expectations of whether individual national central bank follows/doesn’t follow the Fed’s emergency rate cut as the main market theme is now “coordinated easing of global monetary policy” in response to a rare combination of supply and demand shocks that hit the world economy.

It is thanks to this factor that GBPUSD extended gains today as the Bank of England disappointed investors, hinting that it is not going to cut the rate before the meeting in March. Recall that the Fed tried to set the baton by cutting the rate by 50 bp before the March meeting. Powell’s press release and comments clearly failed to give the impression that the move was a one-time action, so the market wants more, as evidenced by continued decline in yield on 10-year US Treasury bonds. Expectations that the Fed will lower the rate further (by buying bonds from the market) are pushing the price of risk-free securities up.

The new head of UK Central Bank said on Wednesday that the regulator will hold off with actions since it is not yet possible to assess the potential damage to the economy. Comments by the head of the Central Bank allowed the pound to develop an uptrend after it touched a minimum of 4.5 months against the dollar last Friday. It also went up against the euro.

Nevertheless, at a meeting on March 26, it is expected that the British Central Bank will lower the rate. These expectations limit the growth of the pound, but if the contrary information appears on the market, the pound may rise above 1.30 with the target at 1.30675 (February peak). In addition, the strengthening of the GBPUSD pair is very likely due to the general weakening of the dollar, so an emergency rate cut did not save the markets from expectations of a new rate cut.

The technical picture for the pound is as follows:

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The intraday rebound after breaking through the level of 1.29 is now confirmed by overbought RSI. Given that the Fed has already flashed its cards and the head of the Bank of England has rejected emergency easing and has yet to make a decision on March 26, this uncertainty creates room for downward adjustment of the chances of policy easing (especially if the news background changes to a more favorable one). If the current repeated breakthrough of the resistance level (blue oval) is confirmed by a sustainable rebound, the pair will probably be able to develop an upward movement to the level of 1.29500, and then after correction, aim at the level of 1.30675, the February peak.

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