The British Pound Sterling saw a surge to near 1.3300 against the US Dollar following the Federal Reserve’s significant rate cut and expectations of further policy easing. The Bank of England (BoE) announced that interest rates would remain unchanged at 5%, as anticipated. Additionally, UK services inflation increased to 5.6% in August. It was revealed that UK core inflation, excluding volatile items, accelerated to 3.6%, higher than market expectations. Furthermore, services inflation, a key indicator for BoE officials, rose sharply to 5.6%.
During the monetary policy announcement, the BoE’s Monetary Policy Committee decided to maintain interest rates at their current level. Swati Dhingra, an external MPC member, voted for cutting interest rates for the second time in a row, while the rest of the committee supported keeping rates steady. Additionally, it was voted unanimously to reduce the holding of government bonds by 100 billion pounds over the next 12 months. Market participants are now anticipating another rate cut from the BoE in future policy meetings.
The British Pound showed strength against its major counterparts, especially the Japanese Yen, on Thursday. The Pound was the strongest against the Yen among the listed major currencies. A table presented the percentage change of the British Pound against various currencies on that day. The Pound was also strong against the Euro and the Swiss Franc. The heat map indicated the percentage changes of major currencies against each other, with the base currency chosen from the left column and the quote currency from the top row.
The Pound Sterling rallied close to 1.3300 against the US Dollar as the latter weakened following the Federal Reserve’s rate cut. Analysts suggest that the Fed may further reduce interest rates, with a possibility of another 50-basis points cut in November. Fed Chair Jerome Powell expressed confidence in the US economy, noting growth at a solid rate and a labor market still at strong levels. Investors are keeping an eye on the weekly Initial Jobless Claims data for more insights into the US economy.
In terms of technical analysis, the Pound Sterling is aiming to extend its gains above 1.3300 against the US Dollar. The GBP/USD pair remains strong in the short term as it stays above the 20-day Exponential Moving Average near 1.3100. The 14-day Relative Strength Index (RSI) suggests the potential for bullish momentum, with resistance levels at 1.3266 and 1.3500 on the upside and crucial support at 1.3000 on the downside. Traders will be closely monitoring these levels for potential trading opportunities.
