Dollar reversed gains made in the first half of Thursday session with the DXY shedding nearly half a percentage point after EU and UK central banks signaled that they would be catching up with the Fed in terms of policy tightening. The Bank of England raised the rate to 0.5%, however, the fact that 4 out of 9 officials voted for an increase to 0.75% makes it clear that the BoE has not finished the tightening cycle and if inflation persists, then the markets should be ready to price in another rate hike on one of the upcoming meetings, in March or maybe in May. In addition, the BoE has completed QE program and will gradually move to the sale of assets from the balance sheet.

The limit of the current cycle of raising rates by the Bank of England should be the level of 1%. For now, policymakers have said they will "consider" actively selling government bonds to speed up the process of reducing their balance sheet. Needless to say, this is uncharted territory for any mature central bank and could prove to be much more of a challenge than simply stopping reinvestment, especially if the Bank finds itself selling during a market turmoil.

In case of weak NFP print tomorrow, which may somewhat soften expectations regarding the Fed's March rate hike, GBPUSD has the opportunity to continue moving within the uptrend and test the level of 1.38 as the BoE’s policy gap with the Fed apparently narrows:

The ECB announcement contained no surprises, but Lagarde's hawkish comments allowed the Euro to challenge 1.14, the highest level since mid-January. Weak labor data tomorrow will likely give a green light for EURUSD to test the horizontal resistance at 1.1470: