- The Pound Sterling falls to nearly 1.2800 against the US Dollar ahead of the BoE policy meeting.
- Investors expect the BoE will cut interest rates by 25 bps to 5%.
- The US Dollar recovers despite the Fed’s dovish guidance on interest rates.
The Pound Sterling (GBP) slides further and posts a fresh three-week low to near 1.2770 against the US Dollar (USD) in Thursday’s London session. The GBP/USD pair weakened after breaking below the three-day consolidation range as the US Dollar (USD) rises even though the Federal Reserve (Fed) has delivered dovish guidance on interest rates in its monetary policy announcement on Wednesday.
The US Dollar has bounced back strongly after a Fed policy-inspired sell-off as a dovish guidance was already priced in by market participants. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, moves higher to near 104.40 from its intraday low of 103.86.
The Fed left interest rates unchanged in the range of 5.25%-5.50% for the eighth consecutive meeting and acknowledged that moderation in inflationary pressures in the second quarter had increased their confidence that rate cuts could be on the table in the September meeting. The Fed admitted that risks are now widened to both aspects of dual mandate.
Fed’s Chair Jerome Powell said, "If we were to see inflation moving down more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting”, Reuters reported.
In Thursday’s session, the United States (US) ISM Manufacturing Purchasing Managers’ Index (PMI) report for July will be under the spotlight, which will be published at 14:00 GMT. The PMI report is expected to show that activities in the manufacturing sector improved, rising to 48.8 from the former reading of 48.5, but remain contracted. A figure below the 50.0 threshold is considered a contraction in factory activities.
Daily digest market movers: Pound Sterling plummets while US Dollar bounces back strongly
- The Pound Sterling faces a sharp selling pressure against its major peers in Thursday’s London session. The British currency weakens ahead of the Bank of England’s (BoE) interest rate decision, which will be announced at 11:00 GMT.
- According to Reuters, traders see a 66% chance that the BoE will cut its key borrowing rates by 25 basis points (bps) to 5%, with a 5-4 majority in the Monetary Policy Committee (MPC) vote. The BoE’s rate-cut decision would be the first since March 2020, as the central bank has been maintaining a restrictive monetary policy stance since December 2021 in an attempt to bring inflation down, driven by pandemic-led stimulus.
- Market experts see the BoE rate-cut move as a tough call by policymakers as inflation in the service sector at 5.7% is significantly higher than the bank’s forecast of 5.1%. Though annual headline inflation has returned to the bank’s target of 2%, policymakers remain concerned over high service inflation and tightness in the United Kingdom (UK) labor market, which could lift price pressures again.
- BoE Chief Economist Huw Pill raised concerns over high service inflation and strong wage growth momentum in his speech before the blackout period of the BoE policy meeting. Pill said service inflation and wage growth showed "uncomfortable strength" despite the return of the headline inflation to 2%, Reuters reported.
Pound Sterling Price Today:
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.42% | 0.69% | -0.22% | 0.17% | 0.40% | 0.18% | -0.25% | |
| EUR | -0.42% | 0.28% | -0.65% | -0.25% | -0.01% | -0.23% | -0.66% | |
| GBP | -0.69% | -0.28% | -0.92% | -0.52% | -0.28% | -0.51% | -0.94% | |
| JPY | 0.22% | 0.65% | 0.92% | 0.39% | 0.63% | 0.35% | -0.06% | |
| CAD | -0.17% | 0.25% | 0.52% | -0.39% | 0.24% | 0.01% | -0.42% | |
| AUD | -0.40% | 0.00% | 0.28% | -0.63% | -0.24% | -0.22% | -0.63% | |
| NZD | -0.18% | 0.23% | 0.51% | -0.35% | -0.01% | 0.22% | -0.43% | |
| CHF | 0.25% | 0.66% | 0.94% | 0.06% | 0.42% | 0.63% | 0.43% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Technical Analysis: Pound Sterling dives below 1.2800
The Pound Sterling declines to near the lower boundary of a Rising Channel chart pattern on a daily timeframe. The GBP/USD pair fell on the backfoot after breaking below the crucial support of 1.2900. The Cable dives below the 50-day Exponential Moving Average (EMA) near 1.2790, suggesting that the near-term trend has become bearish.
The 14-day Relative Strength Index (RSI) declines toward 40.00, which would a be cushion for the momentum oscillator.
Economic Indicator
BoE Interest Rate Decision
The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.
Read more.Next release: Thu Aug 01, 2024 11:00
Frequency: Irregular
Consensus: 5%
Previous: 5.25%
Source: Bank of England
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