Pound lost more than 250 points from its intraday high this afternoon after the Bank of England posted its most aggressive rate hike in 33 years. In normal times, this would have led to a record rise of GBP/USD, but now things are very different: after the rate hike, the bank said it is revising its expectations for further increases, warning that if it followed an aggressive path, everything would lead to a two-year recession.

The Monetary Policy Committee voted 7-2 to raise rates by 75 basis points to 3%, the highest level in 14 years. However, the summary indicated that the peak would be lower than markets are expecting. This is because maintaining the aggressive path presented in recent forecasts, where the rate peaks at around 5.25% next year, will lead to a 3% decline in GDP and eventually a recession. The new forecast, based on rates remaining at the current 3%, suggests a shorter and shallower recession and expects inflation to return to its target in two years. In other words, the Bank of England has made it clear that it no longer intends to pursue an aggressive monetary policy.

Bank of England Governor Andrew Bailey also talked about the mortgage market, indicating that he is excited over what is going on there. The rapid hike in interest rates has sent mortgage prices up to 6% in recent weeks, compared to around 1% at the end of last year when the Bank of England began to tighten policy. This is why pound fell sharply even though interest rates were increased. Bailey's statements about future policy stand in stark contrast to that of Fed Chairman Jerome Powell, who said that US rates are likely to be higher than markets expect. The difference in the course of central bank policies resulted in a major sell-off in GBP/USD.

UK government bonds also fell after the decision of the Bank of England. Investors have revised their outlook on future UK rates, expecting a high of around 4.75%.

Finance Minister Jeremy Hunt also backed the central bank's decision, saying it was critical to get inflation under control. He expressed sympathy for households struggling with higher borrowing costs.

As for the technical picture of GBP/USD, after the collapse of more than 200 points during the Asian session, there was a slight correction. Now, buyers are focused on defending the support level of 1.1200 and breaking through the resistance level of 1.1260. Only a break of 1.1260 will return the prospects for growth to 1.1330 and 1.1400, after which it will be possible to see a sharper upward spurt of pound to 1.1490. Pressure will return if sellers take control of 1.1200. Its breakdown will push the quote back to 1.1140, then to 1.1060.

In EUR/USD, sellers took control of the market, prompting a new wave of decline. To change this, traders need to return the pair above 0.9790 as only by that will the quote move towards 0.9840 and beyond. However, upward prospects will depend entirely on the reaction of markets to data on the US labor market. If selling pressure persists, the pair will fall below 0.9745, then go to the next low of 0.9700. It could also drop to 0.9630 and 0.9590.