The Bank of England cut interest rates as expected by 1% today to take them to 2% overall. I think this is a good move because the British economy is completely dying at the moment. However while it may potentially shorten and reduce the severity of the forthcoming recession, it's not good news for the GBP/USD pair.

Regular readers of this blog will know that I've been bearish on this pair for quite a few months now, and nothing has changed because I still can't see any signs of a turnaround. The Supertrend is still red on the daily, weekly, monthly and quarterly charts (indicating a bearish trend), and the attempt to start a new upwards trend in the last week or so failed miserably when the EMA (5) failed to cross the EMA (20) on the daily chart.

Fundamentally I also think that we will struggle to see a meaningful reversal on the GBP/USD until the Bank of England has finished cutting interest rates. I initially thought 2% might be the bottom a few months ago but most economists are now suggesting that 1% interest rates could be possible in the coming months. So this means that the GBP/USD could well remain weak going until the first half of 2009, and therefore a potential fall to 1.30 or even lower cannot be ruled out.