GBPUSD struggles to maintain strength amid shifting factors. The Bank of England (BoE) made headlines by surprising the market with an unexpected decision to keep interest rates unchanged. This decision, contrary to expectations of a rate hike, added pressure to the pound.
The BoE’s stance was influenced by UK inflation data, which unexpectedly decreased from 6.80% in July to 6.70% in August. The Monetary Policy Committee voted 5-4 against raising rates. They are opting for an acceleration in quantitative tightening instead.
The British pound has been facing headwinds from various sources in the past few weeks. The BoE also downgraded its growth forecast for 2023, citing the impact of Brexit uncertainty and supply chain disruptions. The BoE Governor, Andrew Bailey, said that the inflation spike is likely to be temporary and that the central bank will not act prematurely to tighten monetary policy.
Feds Maintain Hawkish Stance
On the other hand, the US dollar has been supported by the hawkish stance of the Federal Reserve (Fed). This signaled its intention to start tapering its bond-buying program soon. The Fed Chair, Jerome Powell, said that the US economy has made substantial progress towards the Fed’s goals. It involves maximum employment and price stability, and the inflation surge is mostly due to transitory factors.
The GBPUSD pair has been trading in a sell direction since September. However, the pair yields more depending on how the economic data and the central bank’s actions evolve. More attention should be paid to the price response to this effect.
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