GBPUSD Sinks on Dovish BOE Comments

Pound Breaks DownGBPUSD is holding for now at the foot of yesterday’s losses following dovish commentary from BOE chief economist Huw Pill. The BOE policymaker told reporters that the bank is on course to cut rates this year, provided inflation continues to fall. However, there was a slight dovish twist in the commentary as Pill signalled that the bank could cut rates ahead of inflation hitting the BOE’s 2% target, as a “reward” to the economy for bringing inflation down.BOE Policy Outlook Has ‘Shifted’While Pill added the caveat that it was still premature to be talking about rate cuts, he did note that the bank’s outlook on monetary policy had “shifted.” These comments come on the back of the latest BOE meeting last week which saw the bank holding rates unchanged while signalling that rates would need to stay in restrictive territory for some time. However, a shift in the voting split (which saw 1 member voting for a cut already), was seen as an indication of a growing dovish skew at the bank.UK Data on WatchLooking ahead, traders will now be highly sensitive to incoming UK data as they try to gauge when the bank is likely to move on rates. Given the uptick in CPI in December, if inflation is seen to have fallen back in January this should drive short-end rate cut expectations higher, pulling GBP lower near-term.Technical ViewsGBPUSDPrice has now broken below the 1.2612 support level, which framed the trading range of the last two months. Extending the channel breakdown, focus is now on a continuation lower and a test of the 1.2437 level next in line with bearish momentum studies readings.