- GBP/USD gains traction and edges higher to 1.2730, up 0.17% on the day.
- The Bank of England (BoE) hiked rates by 25 basis points (bps) from 5% to 5.25% in its August policy.
- Market players will monitor the US Nonfarm Payrolls due later in the day.
The GBP/USD pair holds a positive note and snaps a four-day losing streak during the early Asian session on Friday. The major pair currently trades at 1.2730, gaining 0.17% for the day.
The Bank of England (BoE) raised interest rates by 25 basis points (bps) to a 15-year high of 5.25% from 5% in its August policy meeting on Thursday. Markets anticipated that the BoE would likely hike two additional rates by the end of the year as inflation remains high. That said, the June UK Consumer Price Index (CPI) was 7.9%, nearly four times the BoE target of 2% and more than double the US rate.
BoE Governor Andrew Bailey stated on the policy outlook that the central bank expects inflation to fall to around 5% in October. He added that there is no presumed future path for interest rates.
On the US Dollar front, the US Department of Labor showed on Thursday that Initial Jobless Claims increased to 227,000 for the week ended July 29, matching expectations. The ISM Service PMI for July dropped to 52.7 from 53.9 prior and was worse than expected at 53. Lastly, Unit Labor Costs from Q2 came in at 1.6%, lower than the 2.6% expected.
Last week, the Fed decided to increase interest rates by a quarter percentage point in its July meeting. However, unlike the BoE, markets believe the Fed is nearing the end of its tightening cycle.
Market players will closely watch the US Nonfarm Payrolls due later in the day. This event could provide hints for a clear direction in GBP/USD. Also, the Unemployment Rate and Average Hourly Earnings will be released on Friday. In the absence of top-tier economic data releases from the United Kingdom, investors will digest the statement from the BoE meeting, and the USD price dynamic will be the main driver for the GBP/USD pair.
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