The Pound Sterling (GBP) experienced a decline against the US Dollar (USD) after the Bank of England (BoE) cut interest rates by 25 basis points to 5%. The decision was made with a 5-4 majority in the Monetary Policy Committee (MPC) vote, aligning with market expectations. BoE Governor Andrew Bailey emphasized the importance of maintaining low inflation levels and hinted at a cautious approach towards interest rate cuts. The UK’s service inflation outlook may experience a slight increase in August before easing for the rest of the year.
Despite the BoE’s decision, the Pound Sterling struggled against the US Dollar, posting a fresh three-week low near 1.2770 in the American session. The GBP/USD pair weakened following a break below the three-day consolidation range, even as the US Dollar strengthened after the Federal Reserve (Fed) maintained interest rates within the 5.25%-5.50% range. Fed Chair Jerome Powell indicated that a rate cut could be on the table at the September meeting if inflation remains in line with expectations, growth remains strong, and the labor market conditions are stable.
The US Dollar Index (DXY) rose to near 104.20 from its intraday low of 103.86, despite struggling to hold gains due to a weak US ISM Manufacturing Purchasing Managers’ Index (PMI) report for July. The report revealed a contraction in manufacturing activities to 46.8, lower than the expected figure of 48.8. The Pound Sterling’s performance against various major currencies can be analyzed through the percentage changes displayed in a heat map, showing relative strength compared to the Euro and other currencies.
In terms of technical analysis, the Pound Sterling declined towards the lower boundary of a Rising Channel chart pattern on a daily timeframe following a break below the key support level of 1.2900. The GBP/USD pair fell below the 50-day Exponential Moving Average (EMA) near 1.2790, indicating a bearish trend in the near term. The 14-day Relative Strength Index (RSI) dropped towards 40.00, suggesting a possible area of support for the momentum oscillator. Overall, the Pound Sterling’s performance against the US Dollar continues to be impacted by central bank decisions and economic indicators in both countries.
