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01/08/24
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GBP Sharply Down After BoE Rate Cut
On Thursday, the British pound dropped sharply, and GBP/USD traded at about 1.2774, down 0.63% for the day in the North American session. GBP/USD earlier dropped to 1.2750, the lowest level in a month.
This week, the Bank of Japan hiked interest rates, the Federal Reserve kept its benchmark rate unchanged, and the Bank of England decided to cut rates.
The BoE implemented a rate cut earlier on Thursday, the first time it has done so in more than four years. The 0.25% cut took the cash rate down to 5%.
The BoE meeting was live as the markets were not certain right up to decision time as to whether the Bank would cut or hold rates. Before the meeting, the markets had priced in a 61% likelihood of a 0.25% cut, which resulted in many surprised investors after the meeting.
The Monetary Policy Committee voted 5-4 for a cut, with 4 members wanting to keep rates unchanged. The markets had anticipated a 6-3 vote.
The BoE didn’t give any clues on the future rate path, but there may be more cutting later this year if inflation continues on its current path downward. Although headline inflation dropped to the BoE’s target rate of 2% in May and June, services inflation is still much higher at 5.7%.
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