The GBPUSD currency pair was trading down over 20 pips as investors wait for the Bank of England interest rate decision scheduled for Thursday this week. The lack of news releases from the British and American dockets contributed to the pair’s lack of momentum.
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The Sterling pound had performed excellently against the US dollar and is up almost 1000 pips from the year-to-date lows of 1.1819 reached on 08 March 2023, before the current uptrend began that has seen the bulls push prices higher over the past few months.
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Despite inching lower today, the GBPUSD currency pair is still trading near the fourteen-month highs hit on Friday as the Sterling pound remains much stronger than the US dollar. The same scenario will continue if the Bank of England hikes interest rates later this week.
The BoE is widely expected to hike interest rates on Thursday, strengthening the pound over time as the interest rate differential between the two countries narrows further now that the Fed has decided to pause interest rate hikes.
If the Central Bank decides to hike rates as expected, the pound could soar to new highs as investors respond bullishly to the news. The BoE is still keen to fight record-high inflation, which has fallen less than we have seen in the United States.
Headline inflation in the UK remains stubbornly high and is expected at 8,7% compared to May 2023, while the core inflation trend remains high at 6.8%, much higher than the BoE’s target range of 2%.
The BoE rate hike would bring UK interest rates up to 4.75%, just 0.5% off the US interest rate at 5.25%. If the UK inflation figures are much higher than expected, they will guarantee that the BoE will have no choice but to hike interest rates.
Therefore, today's lack of high-impact news meant that most currency pairs had minimal movement, but this will likely change as the week progresses.Â
*This is not investment advice.
GBPUSD price chart.
The GBPUSD currency pair was trading down 26.3 pips (0.18%) at writing as investors eagerly await the BoE rate decision.
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