GBP/USD Forecast: Pound Sterling could test 1.2700 on a hawkish BoE surprise

• GBP/USD went into a consolidation phase above 1.2600 early Thursday.
• Fed Chairman Powell’s dovish remarks triggered a USD selloff late Wednesday.
• BoE policy statement and vote split on rate decision could drive Pound Sterling’s valuation.

GBP/USD gathered bullish momentum and advanced to a 10-day-high above 1.2600 on Thursday. The pair’s near-term technical outlook points to a bullish tilt but the Bank of England’s policy announcements could drive the action later in the day.

The Federal Reserve (Fed) left the interest rate unchanged at 5.25%-5.5% following the December policy meeting as anticipated. The revised dot plot, formally knows as the Summary of Economic Projections, pointed to a total of 75 basis points rate reduction in 2024.

In the post-meeting press conference, Fed Chairman Jerome Powell said that they don’t want to make the mistake of keeping rates too high for too long. Powell also noted that there was a general expectation among policymakers that rate cuts will be a topic of conversation moving forward. Powell’s dovish tone triggered a rally in Wall Street’s main indexes, causing the US Dollar (USD) Index and US Treasury bond yields to decline sharply.