- GBP/USD lacks firm intraday direction as traders choose to await BoE policy decision.
- The focus will remain on the accompanying policy statement and the post-meeting press conference.
- USD languishes near multi-week low amid dovish Fed outlook, providing support.
The GBP/USD pair is struggling to capitalize on the previous day’s positive post-FOMC move and is hovering in a tight trading range during the Asian session on Thursday. Spot prices are currently trading around the mid-1.2800 zone, almost unchanged on the day as traders opt to wait on the sidelines ahead of the Bank of England (BoE) policy update.
Signs that inflationary pressures are easing globally have been fuelling speculation that the UK central bank will cut interest rates later today. In fact, financial markets are pricing in more than a 65% chance that the BoE will cut rates from a 16-year high of 5.25% and expect a further quarter-point cut before the end of the year. This, in turn, is seen as a headwind for the British Pound (GBP) and acts as a headwind for the GBP/USD pair.
However, investors are far from certain that the BoE will act immediately, as UK services inflation remains uncomfortably high. This, in turn, prevents traders from opening fresh directional bets around the GBP/USD pair and leads to range-bound price action. Therefore, the focus will remain on the accompanying monetary policy statement and BoE Governor Andrew Bailey’s comments at the post-meeting press conference.
Looking ahead to the central bank event risk, the US Dollar (USD) post-FOMC selling bias continues to offer some support to the GBP/USD pair and should help limit the downside. The US central bank acknowledged the recent progress in inflation and cooling labor market. Moreover, Fed Chair Jerome Powell signaled the likelihood of an early rate cut if inflation remains in line with expectations and dragged US Treasury bond yields lower.
In fact, the 10-year US government bond yield falls to its lowest level since February. Apart from this, the risk momentum – as reflected in a generally positive tone in global equity markets – keeps the safe-haven USD depressed near a three-week low, which, in turn, is seen to lend support to the GBP/USD pair.
Economic indicator
BoE interest rate decision
He Bank of England sets the interbank interest rate. This interest rate affects a range of interest rates set by commercial banks, building societies and other institutions towards their own savers and borrowers. It also tends to affect the price of financial assets such as bonds, shares and exchange rates, which affect consumer and business demand in a variety of ways.
Next post:
Thu Aug 01, 2024 11:00
Frequency:
Irregular
Dear:
5%
Previous:
5.25%
Fountain:
Bank of England
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
