The GBPUSD currency pair was trading sideways today despite the Bank of England announcing a massive 50 bps rate hike, beating analysts' expectations of a 25 bps rate hike. The BoE’s latest rate hike lifts the bank’s lending rate to 5.00% from 4.50%.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
The lack of movement witnessed in the currency pair could be attributed to investors’ and analysts' concerns about the future of the UK economy following the latest rate hike. However, the BoE deemed the jumbo rate hike necessary given that UK inflation remains decidedly high compared to the US.
Top Broker Recommendation
- eToro Top stock trading platform with 0% commission – Read our Review
- Admiral Markets More than 4500 stocks & over 200 ETFs available to invest in – Read our Review
- BlackBull 26,000+ Shares, Options, ETFs, Bonds, and other underlying assets – Read our Review
- IG Top-tier regulation – Read our Review
- XTB UK regulated by the FCA – Read our Review
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
The UK inflation does not show signs of abating, as evidenced by the latest UK CPI data released yesterday, which showed that inflation rose to 8.7% in May from the 8.4% print recorded in April, in a sign that it would take much more from the BoE to tame the rampantly high inflation.
Instead of the GBPUSD currency pair rallying to new highs, as would be the case whenever the BoE announces a rate hike, we saw the currency pair remain stuck in the same sideways trend that had persisted for the past five days, including today.
The BoE’s Monetary Policy Committee (MPC) noted that the impact of the latest rate hike may take a while to be felt across the economy. The MPC also admitted that it expects the CPI to fall significantly in the year's second half due to lower energy prices.
The MPC also noted that the impact of the rate hikes on domestic wages and prices is likely to take longer to unwind than it did to emerge. Still, despite today’s massive rate hikes, analysts are pricing in about two more rate hikes from the BoE for the year.
However, the bank may raise rates more than twice if the inflation rate does not fall as expected in H2 2023. The MPC expects the UK Q2 GDP to remain flat as economic growth slows while the underlying quarterly growth rate rests at 0.25%.
The MPC also confirmed keeping a close eye on developments in the rental housing segment. The committee also noted that the UK has a high percentage of fixed-rate mortgages.
*This is not investment advice.
The GBPUSD price chart.
The GBPUSD currency pair was trading sideways despite the jumbo BoE 50bps rate hike amid concerns.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.