GBP/USD hits fresh six-month low below 1.2250 on BoE’s surprise hold

GBP/USD sees a fresh bout of selling pressure, hitting the lowest level since March this year, as the Pound Sterling feels the heat of the dovish Bank of England (BoE) interest rate decision.

BoE pauses, hits Pound Sterling

Following the September meeting, the BoE decided to keep the benchmark interest rate steady at 5.25%, as against market expectations of a 25 basis points (bps) hike to 5.50%. However, industry experts and analysts had begun pricing chances of a status quo after the unexpected fall in the UK inflation data for August.

The Office for National Statistics (ONS) said on Wednesday that the UK annual Consumer Price Index (CPI) edged 6.7% higher in August, cooling off from a 6.8% rise in July. The market consensus was for a 7.1% increase. The Services CPI rose 6.8% YoY vs. July’s 7.4% surge. The ONS said, “the largest downward contributions to CPI rates came from food and accommodation services.”

According to the Overnight Index  Swaps (OIS) curve, the odds of a 25 bps November BoE rate hike have dropped to 64% from 81% before the interest rate decision.

In the last minutes, GBP/USD is reversing the dip to multi-month lows, recovering above the 1.2250 barrier, still down 0.60% on the day.

Attention now turns toward the US economic data releases, including the weekly Jobless Claims and the Existing Home Sales for fresh US Dollar valuations, especially after the US Federal Reserve (Fed) held rates steady on Wednesday but projected one more 25 bps rate hike this year and 50 bps of rate cuts in 2024, versus 100 bps of 2024 cuts in June projections.

GBP/USD: Technical levels to watch