GBP/USD: rallies to test the 1.34 handle with highs of 1.3421

GBP/USD has broken the 1.34 handle, on a strong rally on Tokyo from 1.3326 session lows.

GBP/USD has been better bid on a recovery from the Brexit sell-off to 1.2794 lows, choppy on its advance. The BoE left rates steady, much to the surprise of many. The voting MPC members came out as  8-1 with their statement saying: "Committee members made initial assessments of the impact of the vote to leave the European Union on demand, supply and the exchange rate. In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the Committee expect monetary policy to be loosened in August. The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round."

While the Fed are in no hurry to raise interest rates, the pound can gain traction on its advance now that it has surpassed the 4th July highs at 1.3340 and having made highs overnight of 1.3477. However, the BoE's inflation report on the 4th of August could be the forthcoing event that markets would not wish to get too ahead of themselves in carrying the pound and it is expected that the BoE will be easing in the near future, perhaps Ausgust as mentioned in the statement.

GBP/USD levels

"Advances up to 1.3500 will likely be seen as selling opportunities, whilst an extension below 1.3220 should see the pair extending its decline down to the 1.3100 region," explained Valeria Bednarik, chief analyst at FXStreet.