- GBP/USD is holding itself above 1.1250 as the impact of hawkish Fed policy has started fading away.
- The BOE has pushed its interest rates to 2.25, the highest since 2008.
- BOE’s denial of an aggressive policy approach seems the weak economic fundamentals.
The GBP/USD pair is displaying a lackluster performance after declining from the critical resistance of 1.1350 in the early Asian session. The cable is oscillating in a narrow range of 1.1250-1.1266 and is expected to continue the volatility contraction pattern ahead of the PMIs data. Earlier, the asset rebounded firmly after sensing a decent buying interest of around 1.1200. The decline move from 1.1350 is a corrective move, which seems to conclude sooner and an upside journey will resume.
The pound bulls displayed wild swings after the announcement of the interest rate decision by the Bank of England (BOE). BOE Governor Andrew Bailey elevated the interest rates by 50 basis points (bps) and pushed the terminal rate to 2.25%. This has been the highest borrowing cost since 2008.
Investors should note that the UK economy is facing the headwinds of soaring price pressures at most and yet they have not adopted an aggressive approach toward monetary policy. The rationale behind moving calm is the poor economic fundamentals, vulnerable labor market conditions, and weak labor market index. The unavailability of support from domestic economic catalysts kept the BOE policymakers to go all in on interest rate elevation unhesitatingly.
Going forward, UK’s S&P Global PMI data will hog the limelight. An improvement in Manufacturing PMI is expected as the economic data is seen at 47.5 vs. the prior release of 47.3. While the Services PMI is expected to scale lower to 50.0 vs. the former figure of 50.9.
Meanwhile, the US dollar index (DXY) is sensing a decline in the buying interest as the impact of extremely hawkish Federal Reserve (Fed) policy has started fading away. Now, investors have shifted their focus towards the PMI data, which is expected to display a mixed performance. A preliminary reading shows a soft landing of Manufacturing PMI at 51.1 while Service PMI will improve significantly to 45.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD heads for biggest daily gain in a month ahead of Powell Premium
EUR/USD reached a peak at 1.0579, marking the highest level in two days, before pulling back towards 1.0550. Despite the retreat, the Euro is having its best performance in a month. Market attention is now shifting towards the upcoming speech by Fed Chair Powell.
GBP/USD consolidates gains near 1.2200
GBP/USD extended its rebound and rose to 1.2224. Later it pulled back under 1.2200, but is still headed toward the biggest daily gain in more than a month. A correction of the US Dollar boosted the pair.
Gold extends slump to the $1,850 region Premium
Gold price extended its decline on Thursday to $1,857.66 a troy ounce, its lowest since early March. The US Dollar lost ground against most major rivals but surged vs the bright metal as the market mood slightly improved. European and American indexes traded with a better tone, helped by encouraging United States macroeconomic data.
Coinbase receives regulatory approval to launch derivative trading for non-US customers
Coinbase is emerging as the biggest entity to defy the enforcement actions pursued by the Securities and Exchange Commission (SEC) after successfully launching its International exchange in Bermuda in Q2 this year.
Germany’s economic health check shows further signs of weakness
The debate over whether Germany is emerging as the 'sick man of Europe' again has picked up steam once again over the summer. In our view, the answer is a resounding "yes”.