The pound reacted with a drop following the news that the Bank of England maintained its rate at 3.75%, and this decision was less unanimous than expected. Seven committee members voted for a pause, while two—Chief Economist Huw Pill and external member Megan Greene—advocated for an immediate increase to 4%. It is worth noting that just a few weeks ago, the market anticipated up to four votes for a hike—there were half that many in reality. The blame lies with the recent data on moderate inflation and the favorable situation in the Middle East.

The keyword in the statement is "encouraging." Governor Andrew Bailey characterized the decline in oil prices to below $80 per barrel, the first time in three months, as follows. This gave the majority of the committee reason to pause: "The tightening of financial conditions, which occurred on its own following the start of the war with Iran, has already provided protection against inflationary risks without the need for direct action," the announcement stated. Bailey described the current position as an active hold—in other words, the market is working in place of the central bank.

However, the tone of the statement is far from dovish. The committee explicitly warned that appropriate measures must be decisive if inflation begins to rise. The seven members who voted for a pause acknowledged the risk of secondary effects similar to those currently observed in the Eurozone, which the European Central Bank responded to by raising rates last Thursday.

The forecast for peak inflation has been revised downward—from 3.6% to 3.25% in the fourth quarter—which, in itself, is an argument for caution but not for inaction.

Evidence of the bank's more cautious hardline policy was reflected in the data released a few hours before the decision. They paint a concerning picture of the real economy. Since the start of the U.S. war with Iran in February, 64,000 jobs have been lost, private sector wage growth has fallen to its lowest in five years, and GDP shrank by 0.1% in April. Weakness in demand and the labor market have become the main argument for the majority against a hike right now.

It is important to note the context in which this decision was made. Prior to the February strikes on Iran, it was expected that the BoE would lower rates in 2026. Now the market is pricing in one hike this year with a 30% chance of a second, a radical turnaround in just a few months.

As I mentioned earlier, the ECB raised its rate to 2.25% last week, and the Federal Reserve delivered a hawkish signal on Wednesday. The BoE remains somewhat isolated at this time, and this is weighing on the pound, which is trading significantly below the levels seen at the start of the year. The sustainability of this position will depend on how quickly the opening of the Strait of Hormuz translates into a real reduction in energy inflation in the British consumer basket.

Regarding the current technical picture for GBP/USD, pound buyers need to reclaim the nearest resistance level at 1.3250. Only this will allow them to target 1.3290, above which it will be quite challenging to break through. The further target will be around 1.3325. In the event of a decline, bears will try to take control of 1.3210. If they succeed, a breakout of this range will deal a serious blow to the bulls' positions and push GBP/USD down to a lowof 1.3180 with the potential to reach 1.3150.