GBP/USD pressured ahead of BOE – BBH

GBP/USD is trading heavy near key support at 1.3400. Bank of England is widely expected to keep rates steady at 4.25% (12:00pm London), BBH FX analysts report.

Dovish tilt could weigh further on GBP

"However, a dovish surprise cannot be ruled out which can undermine GBP. UK private sector regular pay growth slowed more than anticipated in April and points to further easing in services inflation. Moreover, UK real GDP shrank more than expected in April, driven by a sharp drop in the critical services sector."

"Attention will be on the MPC vote split. At the last May 8 meeting, the MPC voted by a 5-4 majority to trim the policy rate by 25bps to 4.25%. Two members preferred to reduce the Bank Rate by 50bps (Taylor and Dhingra) and two members preferred to keep rates unchanged (Mann and Pill)."

"Taylor and Dhingra should back a 25bps cut in June while Mann and Pill will likely vote again to stand pat. This leaves 3 swing votes to decide the policy outcome. Interestingly, BOE Governor Andrew Bailey said after the May 8 meeting 'every meeting is live for us' adding that he's 'very open minded' about a June rate cut. Looking ahead, the swaps market sees 75bps of total easing over the next 12 months."