GBP/USD is consolidating around 1.3450 after a 0.6% rise, driven by the Bank of England’s decision to cut the policy rate by 25 basis points. The decision surprised markets as more members of the Monetary Policy Committee voted for a rate cut than was expected.
The Elliott Wave analysis suggests that GBP/USD is undergoing a correction in a WXY structure, with a key level around 1.3156 where potential buying interest might emerge. The main trend is bullish, and a three-wave bounce from the Blue Box area is anticipated, with strategies involving moving stop losses to breakeven once certain retracement levels are reached.
Bank Of England Rate Cut
The Bank of England’s rate cut signifies concerns about inflationary pressures, despite signalling that further rate cuts might not be forthcoming. The statement accompanied by the rate cut reflects caution, as inflation rates far exceed targets.
In other market movements, EUR/USD trades around 1.1650 with the US Dollar strengthening, impacting its recovery potential. Gold prices are stabilising near $3,400 per ounce, while Bitcoin experienced a slight pullback after nearing $118,000. Additionally, a list is provided for selecting top brokers for trading EUR/USD, focused on competitive spreads and effective platforms for 2025.
The Bank of England’s surprise rate cut has created a complex environment for the pound, with GBP/USD now consolidating near 1.3450. This decision, backed by more members than expected, signals a significant shift in the Bank’s priorities. We believe the focus has moved from fighting inflation to preventing a sharp economic downturn.
This policy pivot seems necessary when we look at the broader economic data from this year. The latest CPI figures from July 2025 showed inflation remains stubbornly high at 5.8%, well above the 2% target. However, with second-quarter GDP growth coming in at a mere 0.1%, the fear of a recession is clearly forcing the Bank’s hand, a tough choice reminiscent of the challenges seen after the 2022 inflation spike.
Economic Sentiment And Market Reactions
In the next few weeks, we anticipate this underlying economic weakness will weigh on the pound. The strong US dollar, buoyed by a Federal Reserve committed to holding its own rates steady, will likely amplify this pressure. We are therefore looking for opportunities to short GBP/USD, targeting the key technical level of 1.3156.
That 1.3156 area is a critical support zone where we expect significant buying interest, as suggested by the Elliott Wave structure. As the price approaches this level, we will prepare to unwind our bearish positions. A bounce from this zone could offer a prime opportunity to switch our bias and initiate long positions.
This cautious sentiment is reflected across other major markets. Gold is holding firm near $3,400, acting as a reliable hedge against the kind of stagflation fears that this Bank of England move brings to the forefront. The strong US dollar is also keeping EUR/USD pinned down around 1.1650, confirming a broad-based demand for the dollar over European currencies.
