- The pound sterling sinks more than 200 points weighed down by the declarations of the governor of the BoE, Bailey, in which he affirmed that the rates would be lower than expected by the market.
- The US dollar continues to rise against most of the G8 currencies, supported by comments from the Fed and the US services PMI.
- GBPUSD traders brace for Friday’s US Non-Farm Payrolls report.
The GBP/USD continues to fall during the North American session on Thursday, after rate hikes by the Bank of England (BoE) and the Federal Reserve (Fed), which raised overnight rates by 75 basis points. However, the interest rate differential favors the US dollar to the detriment of the British pound. At the time of writing, the GBP/USD pair is trading at 1.1163, which is a fresh two-week low, down almost 2%.
BOE Governor Bailey objected to rates peaking around 5%, and GBPUSD sank
The BoE’s decision did not help the British pound, as the central bank bucked market expectations to raise the bank rate towards 5%. BoE Governor Andrew Bailey stated: “Further increases in the Bank Rate may be needed to bring inflation back to target sustainably, albeit at a lower level than has been set in markets. financial”. The central bank added that the British economy entered a recession in the three months to September, with output falling by an estimated 0.5%. The BoE expects a “durable recession” to hit the UK, with the duration depending on the BoE’s rate hike.
Also, the lack of a fiscal plan, as new Prime Minister (PM) Rishi Sunak delayed Chancellor James Hunt’s plan, as Sunak, the former finance minister, wants to have some input on the new UK budget.
The dollar extends its gains driven by encouraging economic data from the United States
Elsewhere, the dollar remains supported by hawkish comments from Federal Reserve Chairman Jerome Powell who said rates would be higher than anticipated in September. In terms of data, the US economic calendar revealed that business activity in the services sector, as reported by the ISM, slowed to 54.4 from 56.7 in September, suggesting the economy is cooling. Turning to the US labor market, the US Department of Labor reported that initial jobless claims for the week ending October 28 were lower than expected and increased by 217,000 versus forecasts of 220,000.
GBPUSD Key Technical Levels
Source: Fx Street
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