GBP/USD is trading at 1.2500 ahead of the BoE’s rate decision

The GBP/USD pair drops to 1.2500 on Wednesday, down -0.06%, as the USD strengthens. According to Fed member Kashkari, it’s premature to declare that inflation has stopped, and if it does, they may lower interest rates this year.


The interest rate at 5.25% is anticipated to remain unchanged at the BoE’s Thursday meeting in May. In Wednesday’s early Asian session, the GBP/USD pair trades around 1.2500, on the soft side. A slight recovery for the USD Index, DXY, to 105.40 pulls the key pair down.

As investors’ attention is drawn to the impending monetary policy meeting, the value of the pound sterling tends to decline. It is expected that the UK central bank will maintain interest rates at 5.25%. Nonetheless, the Cable is hurt by rumours that the BoE would lower interest rates before the Fed does. Last month, Governor Andrew Bailey of the Bank of England expressed his comfort level with the market’s projection of two or three rate cuts this year.

Conversely, later on Wednesday, speakers Philip Jefferson, Susan Collins, and Lisa Cook of the Fed are set to talk. On Thursday, the Bank of England’s (BoE) interest rate decision will be the main event.

Neel Kashkari, the president of the Minneapolis Fed Bank, stated on Tuesday that it is premature to declare that inflation has stopped, and if price pressures abate, the Fed may lower interest rates this year. Thomas Barkin, the president of the Richmond Fed, said that the Fed can afford to be patient because of the robust labour market and that he thinks current rates will be sufficient to reduce inflation. Before lowering rates, US Federal Reserve officials emphasized that additional evidence would be required to assess the likelihood for inflation reaching the 2% target.

Fed easing expectations have fallen a bit and lifted the Greenback against its rivals. The chance of a June cut remains steady at around 10%, while September odds have fallen to 85%, according to the CME FedWatch tool. On Friday, traders will monitor the preliminary University of Michigan Consumer Sentiment Index, which is expected to drop from 77.2 in April to 76.0 in May.