Sterling could aim for multi-year highs following tight BoE vote split

• GBP/USD gains bullish momentum and climbs towards 1.3300.
• The Bank of England is expected to keep the bank rate at 5%.
• The split vote could influence the pound’s valuation.

GBP/USD hit its highest level since March 2022 near 1.3300 in the early US session on Wednesday. Although the pair pulled back later in the day, it managed to close in positive territory. Ahead of the Bank of England (BoE) monetary policy announcements, the pair is gaining bullish momentum and trading comfortably above 1.3250.

The Federal Reserve (Fed) decided to cut its policy rate by 50 basis points (bps) to a range of 4.75%-5% after the September meeting. The immediate market reaction put the US dollar (USD) under strong selling pressure and triggered a rally in GBP/USD.

Later in the session, however, cautious market sentiment helped the USD limit its losses and caused GBP/USD to pull back. In the press conference after the meeting, Chairman Jerome Powell explained that they could reduce the pace of cuts if the economy remains strong, while adding that downside risks to employment have increased.

The BoE is expected to keep the bank rate at 5%. Because there will not be a press conference, investors will carefully scrutinize the language of the statements and the distribution of votes. In August, BoE policymakers voted 5-4 in favor of a 25 bps cut. If the BoE leaves interest rates unchanged, with a large majority of policymakers, 7 or more, agreeing to this decision, the pound could retain its strength. If it’s another close call, like in August, GBP/USD may struggle to extend higher with the immediate reaction.

Meanwhile, US stock index futures are trading decisively higher after the Fed. An uptick in risk in the second half of the day could put additional weight on the USD, helping GBP/USD to hold even if the BoE event has an initial negative impact on the pound’s valuation.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart remains slightly above 70, but investors may be ignoring short-term overbought conditions. On the upside, 1.3300 (static level) lines up as first resistance before 1.3340 (March 2022 static level) and 1.3400 (round level).

If GBP/USD pulls back below 1.3260 (static level, former resistance), technical sellers could take action. Below this level, 1.3200 (static level) could be seen as the next support before 1.3150 (100 period simple moving average).