18 September 2025,06:03
Daily Market Analysis
18 September 2025, 06:03
*A 5–4 MPC vote at the last meeting signaled less dovishness than markets expected, limiting downside for the pound.
*UK retail sales and GDP show resilience, while CPI at 3.6%—well above the 2% target—keeps inflation concerns alive.
*The Fed’s recent cut and guidance for further easing has widened the interest rate differential, underpinning sterling strength.
The British pound is poised for heightened volatility ahead of today’s Bank of England monetary policy announcement, with traders anticipating renewed divergence among Monetary Policy Committee members. While the BoE delivered a 25-basis-point cut at its last meeting, the 5–4 split vote revealed a less dovish tilt than markets had expected, tempering expectations for an aggressive easing cycle and providing underlying support for sterling.
Recent UK economic data has offered a mixed but cautiously optimistic backdrop. Headline inflation has eased to 3.6%, though it remains notably above the central bank’s 2% target, while retail sales and quarterly GDP growth have shown resilience, reducing urgency for rapid policy normalization.
Sterling has held firm against major currencies, particularly the U.S. dollar, as the interest rate differential widened following the Federal Reserve’s 25-basis-point cut and signal of additional easing ahead. This policy divergence is likely to continue supporting the pound in the near term, provided the BoE maintains a gradualist approach to rate adjustments.
Today’s decision—and more importantly, the tone of accompanying communications—will be critical in shaping expectations for the September meeting. A reaffirmation of data-dependence and cautious guidance could reinforce sterling’s strength, while any hint of a more assertive easing path may introduce downside pressure.
The GBP/AUD pair has reversed its recent downtrend, breaking decisively above the key resistance level at 2.0450 and establishing a position within a newly formed uptrend channel. The move marks a significant technical shift after the pair declined more than 3% over the preceding two weeks, suggesting a potential end to the corrective phase and the resumption of a broader upward trajectory.
Momentum indicators are reinforcing the bullish reversal. The Relative Strength Index has not only recovered from oversold conditions but has also climbed firmly above its midline, indicating a sustained increase in buying pressure. Concurrently, the Moving Average Convergence Divergence has generated a bullish crossover—often referred to as a “golden cross”—at depressed levels and is now approaching a move above its zero line. This alignment suggests that bullish momentum is accelerating.
The pair now faces near-term resistance near the 2.0650–2.0700 zone, a break above which could open the path toward the next significant technical level near 2.0850. Fundamental drivers, including diverging monetary policy expectations between the Bank of England and the Reserve Bank of Australia, are likely supporting the move, with the BoE’s relatively hawkish stance contrasting with the RBA’s more cautious outlook.
Resistance level: 2.0705, 2.1025
Support level: 2.0450, 2.0100
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