Bank of England comments and decision supports GBP vs USD

Daily Currency Update

The Pound surged against the US Dollar on Thursday after the Bank of England's recent decision and jumped to its highest level since August. The movement in the Pound was largely influenced by the central bank's proactive policy stance, aiding the support of the Pound vs the US Dollar.

The Bank of England kept the interest rates at 5.25%, which is the third consecutive rate hold. Sentiment towards additional monetary tightening was noted if the inflationary pressures continue. Andrew Bailey highlighted the potential for future interest rate hikes and kept to the higher interest rates for a longer stance. The vote split came in as three out of the nine Monetary Policy Committee members favored an incremental increase of 0.25% to 5.50% in interest rates.

Whilst the swaps markets have altered their expectations now regarding interest rate cuts by the Bank of England. Previously, they anticipated a total of 115 basis points in cuts by next year’s end, but following the decision yesterday, markets now anticipate 107 bps of easing. Providing support to the pound and picking up strength against the US Dollar, the Federal Reserve hinted on Wednesday that in 2024, there will be more easing to interest rates than expected. The US Dollar weakened on the low sentiment around further interest rate rises in the US allowing the Pound to peak.