Pound sterling rise against the majority of its rivals as BoE expected to maintain the interest rate at 4.75%.
Ahead of the Bank of England’s (BoE) monetary policy announcement, which scheduled for 12:00 GMT, the pound is performing well in comparison to its key rivals, with the exception of the EUR. With an 8-1 vote split, the BoE anticipated to maintain interest rates at 4.75%. The member of the Monetary Policy Committee (MPC) who is Swati Dhingra, who has been continuously in favor of a more expansionary policy approach, anticipated to vote in favor of a 25 basis point (bps) interest rate cut.
The last two months have seen an increase in UK inflation, which supports the BoE’s decision to maintain stable interest rates.
Given that inflationary pressures in the UK have increased over the past two months, the BoE is almost certain to maintain interest rates at their current level. According to the UK Consumer Price Index (CPI) figures for November, headline inflation increased from 2.3% in October to 2.6% in November, as anticipated. From the previous figure of 3.3%, the core CPI—which does not include volatile categories like food, energy, alcohol, and tobacco—rose to 3.5%.
Investors will closely monitor the BoE’s policy outlook guidance. “We believe that the BoE should not pre-commit to a prolonged cutting cycle or draw the conclusion that there are risks.” had subsided, according to Bank of America (BofA) analysts, who predicted that inflation would eventually return stably to the 2% objective.
The market anticipates that the BoE will reduce interest rates three times in 2025.
Investors will be watching the UK Retail Sales data for November, which is scheduled to be issue on Friday, in terms of economic statistics. After falling by 0.7% in October, retail sales—a crucial indicator of consumer spending— predicted to increase by 0.5% this month.
Daily market Update: As the USD takes a break, the pound sterling strengthens against it.
After dropping to about 1.2560 on Wednesday, the pound sterling bounces back to around 1.2660 versus the US dollar (USD) in Thursday’s London session. The GBPUSD exchange rate rises as the The surge of the US dollar (USD) has stalled after reaching a two-year high. The US Dollar Index (DXY), which compares the value of the US dollar to six other major currencies, is slightly down but still holds the crucial 108.00 support level.
As the Federal Reserve (Fed) signaled fewer interest rate cuts for 2025 after reducing them by 25 basis points to 4.25%-4.50%, the greenback surged. According to the Fed’s dot plot, officials have revised their predictions from the 3.4% predicted in September to a 3.9% rate in 2025.
During the news conference, Fed Chair Jerome Powell stated that the Fed can proceed slowly with rate cuts because of the strength of the economy. Regarding the outlook for inflation, Powell stated that he anticipates “inflation to continue to move down toward the 2% goal, ‘occasionally rough’ journey. In the meantime, in its most recent economic forecasts, the Federal Open Market Committee (FOMC) increased its core Personal Consumption Expenditure inflation (PCE) estimates for 2025 from 2.2% to 2.5%.
Monex Europe analysts predict that the Fed will maintain current interest rates through at least the first half of 2025.
