Pound Sterling strengthens further ahead of the Bank of England’s monetary policy decision.
The Pound Sterling (GBP) extended its recovery on Thursday, trading at 1.2650 vs the US Dollar in the European morning session. Profiting on the US Federal Reserve’s (Fed) unusually dovish stance. The Pound Sterling will remain volatile as the Bank of England (BoE) announces its final monetary policy for 2023 at 12:00 GMT.
Because of the weakening economy and declining inflation, the Bank of England is projected to maintain interest rates at 5.25%.
Markets broadly expect the Bank of England to maintain interest rates at 5.25% for the third consecutive meeting. Due to deepening recession fears and lowering inflation. However, policymakers may emphasize the importance of keeping interest rates “higher for longer” in order to maintain price stability.
The UK economy is contracting, putting Prime Minister Rishi Sunak’s promise of increased growth in risk. As the economy struggles to absorb the effects of higher interest rates. This could weaken the outlook for the GBPUSD in the near future.
Daily Market Movers: Pound Sterling capitalizes on market optimism.
The pound sterling maintains its advances. Buoyed by the Fed’s unchanged interest rate decision for the third time in a row. As well as dovish remarks from Fed Chair Jerome Powell.
The Bank of England’s interest rate decision would guide future Pound Sterling movement. The BoE’s decision will be revealed at 12:00 GMT.
Investors expect the Bank of England to hold interest rates constant at 5.25% for the third time in a row, but markets also expect BoE members to support maintaining interest rates “higher for longer” to ensure price stability.
The BoE would be able to sustain the status quo if pricing pressures eased, wage growth fell, and the economy shrank.
Earnings excluding bonuses increased 7.3% in the three months to October, compared to 7.4% expected and 7.8% previously. Wage growth is declining but remains high.
In October, headline inflation in the United Kingdom fell substantially to 4.6%.
Monthly GDP decreased by 0.3% in October, exceeding the 0.1% contraction in September. Markets have predicted. Since July, this is the first contraction. The Office for National Statistics (ONS) blamed the drop in GDP on unusually wet weather.
A large drop in Manufacturing and Industrial Production has fuelled fears of a UK economic recession.
With the UK’s economy contracting sharply, BoE officials are expected to follow the Fed’s lead and consider reducing interest rates in 2024.
Higher interest rates, according to UK Chancellor Jeremy Hunt, will have a significant influence on the economy.
Jerome Powell remained surprisingly dovish while steering additional monetary policy.
On Wednesday, Jerome Powell remained surprisingly dovish while steering additional monetary policy action, favoring risk-perceived assets.
The Federal Reserve reduced its core Personal Consumption Expenditure (PCE) predictions for 2024 and 2025. Three rate cuts are expected in 2024.
A “soft landing” scenario from the Fed is strongly anticipated, implying that the economy has managed to contain inflation while avoiding economic catastrophe and rising unemployment rates.
