Pound Sterling surges to 1.3300 as BoE keeps interest rates steady at 5%

The Pound Sterling surges to near 1.3300 against the US Dollar following the Fed’s large rate cut and expectations of further policy easing.
The BoE leaves interest rates unchanged at 5%, as expected.
UK services inflation accelerated to 5.6% in August.

Sagar Dua FXStreet

The Pound Sterling (GBP) strengthens against its major peers on Thursday after the Bank of England's (BoE) monetary policy announcement. The BoE left interest rates unchanged at 5%, as expected, as the United Kingdom (UK) core Consumer Price Index (CPI) data for August came in higher than expected.

Out of the nine Monetary Policy Committee (MPC) members, BoE external member Swati Dhingra seldom voted for cutting interest rates for the second consecutive time. The rest of the MPC supported keeping rates at their current levels. Investors were expecting that two MPC members would support a dovish policy decision.

Meanwhile, members unanimously voted to trim the holding of government bonds by 100 billion pounds over the coming 12 months.

The UK core inflation – which excludes volatile items – accelerated to 3.6%, higher than what markets expected. Services inflation, a closely watched indicator by BoE officials, rose sharply to 5.6% from 5.2% in July.

Currently, financial market participants expect that the BoE will cut interest rates one more time in any of its remaining monetary policy meetings.

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 Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.08%	-0.22%	1.02%	-0.27%	-0.64%	-0.34%	0.52%
EUR	0.08%		-0.15%	1.10%	-0.18%	-0.54%	-0.26%	0.60%
GBP	0.22%	0.15%		1.26%	-0.04%	-0.41%	-0.11%	0.74%
JPY	-1.02%	-1.10%	-1.26%		-1.26%	-1.64%	-1.37%	-0.51%
CAD	0.27%	0.18%	0.04%	1.26%		-0.37%	-0.07%	0.78%
AUD	0.64%	0.54%	0.41%	1.64%	0.37%		0.30%	1.14%
NZD	0.34%	0.26%	0.11%	1.37%	0.07%	-0.30%		0.86%
CHF	-0.52%	-0.60%	-0.74%	0.51%	-0.78%	-1.14%	-0.86%

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).

Daily digest market movers: Pound Sterling gives up majority of its gains against US Dollar

The Pound Sterling surrenders the majority of its gains against the US Dollar in Thursday's North American session. The GBP/USD pair drops after posting a fresh two-year high of 1.3300 as the US Dollar rebounds after the release of the United States (US) Initial Jobless Claims data for the week ending September 13. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back above 101.00.
The number of individuals claiming jobless benefits for the first time was 219K, lower than estimates of 230K, and the former release of 231K, upwardly revised from 230K. The impact of the better-than-expected jobless claims data is expected to be short-lived as market speculation for the Federal Reserve (Fed) interest rate cut path will pay a major role in its next move.
On Wednesday, the Fed delivered a 50-basis points (bp) interest rate cut , which signaled that the central bank is confident that inflation is declining to the bank’s target of 2% and is increasingly concerned over deteriorating labor market conditions. Fed Chair Jerome Powell ruled out fears of the United States (US) economy entering a recession: "I don't see anything in the economy right now that suggests that the likelihood of a recession," he said, adding that "you see growth at a solid rate, you see inflation coming down, and you see a labor market that's still at very solid levels."
Fed officials anticipate the federal funds rate heading to 4.4% by the end of the year, suggesting that the Fed will cut interest rates by 50 bps more. According to the CME FedWatch tool, the probability for the Fed reducing interest rates by 25 bps to 4.50%-4.75% in November is at 65.6%, while the rest favors a 50-bps rate cut.
Analysts at Citi see the Fed reducing interest rates by 50 bps again in November. “Powell noted a number of times that today’s 50bp cut is a ‘commitment’ to not get behind the curve, which suggests the bar for further large rate reductions is very low. We continue to see risks as balanced toward a more rapid softening of labor market data and a more aggressive pace of rate cuts.”

Technical Analysis: Pound Sterling struggles to reclaim 1.3300

The Pound Sterling aims to capture 1.3300 against the US Dollar in European trading hours. The near-term outlook of the GBP/USD pair remains firm as it holds above the 20-day Exponential Moving Average (EMA) near 1.3100. Earlier, the Cable strengthened after recovering from a corrective move to near the trendline plotted from the December 28, 2023, high of 1.2828, from where it delivered a sharp increase after a breakout on August 21.

The 14-day Relative Strength Index (RSI) stands above 60.00. A fresh round of bullish momentum could occur if the oscillator sustains around this level.

Looking up, the Cable will face resistance near the August 27 high of 1.3266 and the psychological level of 1.3500. On the downside, the psychological level of 1.3000 emerges as crucial support.

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.

AUD/USD consolidates above 0.7000/two-month low; bearish potential intact

The AUD/USD pair oscillates in a narrow range during the Asian session, and moves little following the release of mixed inflation figures from China. Spot prices currently trade around the 0.7025 region, nearly unchanged for the day, and remain within striking distance of a nearly two-month low set on Tuesday. Renewed hostilities between the US and Iran temper hopes for a deal to end the over three-month-old war.

Japanese Yen languishes despite wholesale inflation accelerates in May

USD/JPY flatlines after experiencing volatility, trading around 160.40 during the Asian hours on Wednesday. The pair continues to hold its ground, reflecting a struggling Japanese Yen that has failed to find support despite a massive acceleration in wholesale inflation. Driven by surging energy costs linked to the ongoing Middle East conflict, Japan’s Producer Price Index jumped 6.3% year-over-year in May. This hot printing comfortably outpaced April’s upwardly revised 5.3% figure and surpassed market consensus of 5.5%, marking the fastest pace of wholesale price growth in three years.

Gold languishes near March low, below $4,200 as traders await US CPI report

Gold maintains its heavily offered tone through the first half of the European session and currently trades near its lowest level since March 23, around the $4,180-$4,175 region. Renewed hostilities between the US and Iran fuel inflationary concerns and bolster bets for more hawkish central banks, driving flows away from the non-yielding yellow metal. The decline could also be attributed to technical selling following the recent breakdown below the very important 200-day SMA and seems unaffected by a softer US Dollar, which tends to benefit the commodity.

Cardano's downtrend deepens despite on-chain bottoming signals

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US CPI data set to show inflation at three-year high in May, backing Fed hawkish tilt

The US Bureau of Labor Statistics will publish the May Consumer Price Index (CPI) data on Wednesday. The report is expected to show another step up in consumer inflation, driven by the persistently high Oil prices due to the ongoing crisis in the Middle East.

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.