The GBP/USD pair is trading around 1.2495 in the early Asian session on Thursday as the US Dollar continues to gain strength. Traders are cautious ahead of the Bank of England (BoE) interest rate decision later in the day, with expectations that the BoE will keep its policy rate unchanged at 5.25%. At the same time, the US weekly Initial Jobless Claims data and a speech from Federal Reserve (Fed) official Mary Daly are also awaited. The recent hawkish comments from Fed policymakers, including Boston Fed President Susan Collins, have lent support to the US Dollar, which has in turn weighed on the GBP/USD pair. The Fed has indicated that it will keep rates at current levels for longer due to the longer-than-expected time it will take to bring inflation down to the 2% target.
The FOMC committee decided to keep interest rates unchanged last week, citing the hotter-than-expected US inflation data as a reason for holding off on any rate cuts. This has led to a shift in market expectations, with fewer rate cuts now expected compared to the beginning of the year. On the other hand, the BoE is expected to maintain its key rate of interest at 5.25% at its May meeting on Thursday, despite speculation that the downward trajectory of UK inflation could prompt a rate cut before the US Fed. Investors will be closely watching speeches from BoE policymakers Bailey and Pill for further insights into the central bank’s stance.
In the event that the BoE continues its dovish stance, the Pound Sterling could face further depreciation against the US Dollar. This could be exacerbated by any hints of a potential rate cut from the BoE in the near future. The GBP/USD pair is likely to remain under pressure as traders digest the latest developments in both monetary policy and economic data releases. The outcome of the BoE interest rate decision and speeches from Fed officials will be key drivers for the currency pair in the coming sessions.
Overall, the GBP/USD pair is facing headwinds from a stronger US Dollar and cautious market sentiment ahead of key central bank decisions and economic data releases. Fed officials’ hawkish comments have provided support for the US Dollar, while the BoE is expected to keep its policy rate unchanged for now. Traders will be monitoring speeches from central bank policymakers for further guidance on future monetary policy decisions, which could impact the direction of the GBP/USD pair in the near term.
