GBP/USD dropped on BoE’s policy decision speculations

The GBP/USD exchange rate fell to its lowest point since July 6 on Friday, and investors are still worried that the Federal Reserve will be attacked by hawks in the wake of the US’s release of stronger-than-expected second-quarter GDP figures.

On August 3, the Bank of England is expected to raise interest rates by a quarter point to 5.25%, while analysts and markets are concerned that a repetition of June’s unexpected half-point hike is possible given that inflation in the UK is still higher than in other major economies.

This week, the US Fed and the ECB both raised interest rates by a quarter of a percentage point, but unlike the BoE, markets believe that their rate-tightening cycle has reached its conclusion or is almost complete.

Meanwhile, in the UK, weaker-than-expected PMI data and lesser inflation are pointing towards a less hawkish outcome at the Bank of England next week. Markets still anticipate a 25 bps hike at the central bank’s August meeting but money markets see a peak of 5.75% in November, lower than prior projections. This leaves a bearish focus on the charts for GBP/USD and bears are already moving in at the end of the week.