GBP/USD showed some recovery but fell back from its daily peak after the Bank of England (BoE) opted to keep interest rates steady on Thursday in what was described as a “dovish” stance. The currency pair is currently up by 0.26%, sitting at 1.3080.
Sterling Gains Eased as Bailey Indicates Gradual Interest Rate Cuts
On Thursday, the BoE decided to maintain interest rates at 4% following a narrow 5-4 vote. The four dissenters advocating for a 25 basis point cut included Mr. Dhingra, Mr. Taylor, Mr. Lumsden, and, intriguingly, Mr. Breeden. During his comments, Bank of England Governor Andrew Bailey highlighted the stabilization of inflation seen in September but cautioned that this was merely a phase, stressing the need for more data.
Bailey’s focus during the press conference was predominantly on inflation. He expressed uncertainty about where the neutral interest rate might lie, emphasizing that the current policy is restrictive.
The Monetary Policy Committee (MPC) at the BoE believes inflation has peaked. “We think rates are on a gradual downward trajectory, but we must ensure that inflation is moving towards our 2% target before implementing any rate cuts,” Bailey elaborated.
Meanwhile, the U.S. Challenger Report from Gray & Christmas noted that over 150,000 jobs were cut in October, marking the largest reduction for that month in more than two decades. The report points to companies making AI-driven changes as a significant factor in these job losses.
This data has influenced expectations for the Federal Reserve’s December gathering, with Prime Market Terminal data indicating a 69% chance that interest rates could be reduced by 25 basis points, an increase from the previous day’s 62% probability.
In an interview with CNBC on Thursday, Chicago Fed President Austan Goolsby remarked that the absence of official inflation data due to the financial institution shutdown adds “increased” caution regarding future rate cuts.
Additionally, the estimated U.S. unemployment rate rose to 4.36% in October, reaching its highest level in four years.
GBP/USD Price Outlook: Technical Analysis
GBP/USD remains above the 1.3000 mark, but for buyers to stay optimistic about pushing the price towards the 200-day simple moving average (SMA) at 1.3257, a clear breakthrough of 1.3100 is necessary.
On the flip side, if GBP/USD consistently closes below 1.3050, sellers could target 1.3000, with the possibility of testing the latest swing low from April 8, which stands at 1.2707.
