Pound Sterling cracks after BoE's dovish rate hold

The Pound Sterling slumps against its major currency peers after the BoE’s monetary policy announcement.
The BoE leaves interest rates unchanged at 3.75%, with a 5-4 split.
Investors expect the Fed to maintain the status quo in the next two policy meetings.

Sagar Dua FXStreet

The Pound Sterling (GBP) extends its decline against its major currency peers on Thursday, following the Bank of England’s (BoE) monetary policy announcement. The British currency has fallen further as five out of nine Monetary Policy Committee (MPC) members have voted to hold interest rates steady at 3.75%, against two expected.

BoE MPC members: Swati Dhingra, Alan Taylor, Sarah Breenden, and Dave Ramsden advocated for another interest rate cut of 25 basis points (bps).

The BoE has reiterated its "graudual monetary easing" outlook, but refrain from providing any timeframe for next interest rate cut. "All is going well, there should be scope for some further reduction in the bank rate this year," as per monetary policy statement.

In the last policy meeting in December, the BoE slashed interest rates by 25 bps to 3.75%, and guided that the monetary policy will remain on a "gradual downward path"

Daily Digest Market Movers: Investors await US JOLTS Job Openings data for December

The Pound Sterling trades 0.60% lower to near 1.3570 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair weakens as the Pound Sterling underperforms and the US Dollar extends its rally amid firm speculation that the Federal Reserve (Fed) will hold interest rates steady for another two meetings ahead.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh over-a-week high at 97.82.
Traders seem confident that the Fed will keep interest rates unchanged in the range of 3.50%-3.75% in its policy meetings in March and April, according to the CME FedWatch tool
Fed dovish projections have cooled as inflationary pressures remain well above the central bank's 2% target, and the impact of recent interest rate cuts is yet to pass through the economy.
On the economic data front, investors shift focus to the US JOLTS Job Openings data for December, which will be published at 15:00 GMT. US employers are expected to have posted 7.2 million fresh jobs, higher than the previous reading of 7.146 million.
In Thursday’s session, investors will also focus on the European Central Bank’s (ECB) monetary policy announcement at 13:15 GMT. The ECB is also expected to leave borrowing rates unchanged, as various officials have expressed that monetary adjustments are not required unless there is a dramatic change in inflation and employment.

Technical Analysis: GBP/USD extends declines slightly below 20-day EMA

GBP/USD trades lower at around 1.3570 as of writing. The price slides below the rising 20-day Exponential Moving Average (EMA) at 1.3601, keeping the short-term bias oriented higher. While, the 20-day EMA has been ascending, the overall trend is still favoring the upside.

The 14-day Relative Strength Index (RSI) at 50 (neutral) has eased from prior overbought readings, indicating bullish momentum has cooled.

Momentum would improve if the price continues to hold above the average, and pullbacks would be supported on first tests of the 20-day EMA at 1.3601. A break below that barrier could shift the bias lower and expose a deeper retracement towards the psychological level of 1.3500. Looking up, the February 4 high of 1.3733 and the four-year high of 1.3870 will be key barriers.

(The technical analysis of this story was written with the help of an AI tool.)

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.

GBP/USD ranges below 1.3450 amid US-Iran uncertainty, ahead of US data

GBP/USD keeps its range below 1.3450 in the European session on Tuesday. Uncertainty surrounding US-Iran talks drives traders toward a safe-haven currency such as the US Dollar, while undermining the risk-sensitive British Pound. All eyes remain on the US JOLTS data and Mideast headlines.

EUR/USD flatlines above 1.1500, awaits US jobs data

EUR/USD holds steady around 1.1505 in European trading hours on Wednesday. Markets remain cautious ahead of a slew of US jobs data, starting with the JOLTS Job Openings Survey later today. However, the downside appears capped by hot Eurozone inflation in July, bolstering the case for a European Central Bank rate hike at the next meeting.

Gold consolidates above $4,050 amid Fed hike bets and Iran uncertainty

Gold seesaws between tepid gains and minor losses during the Asian session as traders seem hesitant and opt to wait for further developments surrounding the Middle East crisis. The US Dollar struggles to build on the previous day's solid bounce from the lowest level since Mid-June and acts as a tailwind for the bullion. However, the uncertainty over US-Iran peace talks helps limit the downside for the buck.

Ripple and Stellar steady as derivatives data points to easing downside pressure

Ripple and Stellar show mixed price action, with XRP holding above the key $1 support zone while XLM faces rejection at $0.173. Meanwhile, improving derivatives metrics alongside fading bearish momentum suggest that the downside pressure may be easing for both altcoins. Derivatives data shows mild bullish sentiment among traders.

US JOLTs report in focus

In the US, the June JOLTs report will be in the spotlight. Job openings have increased modestly this year, which has historically predicted rising wage cost pressures ahead. June trade balance data will also be released in the afternoon and the preliminary reading pointed towards a stable trade deficit from May. The Fed's Schmid (non-voter, hawk) will be on the wires overnight.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.