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The GBP/USD currency pair oscillates near a seven-week high and pauses a two-day rise. BoE announced a rate increase of 0.25%, matching market expectations, and signalling its preparedness for more if inflation remains high.
Treasury bond yields and the US dollar are affected by the Fed’s less hawkish raise as well as the most recent banking crisis. Markets were able to stabilise previous advances in advance of a flood of data due to mixed US data.
Since the turbulent week has one more curveball to play, the GBP/USD bulls take a break near the highest levels in almost two months, moving up to 1.2290 after advancing in the last two straight days. The Cable pair applauded the Fed’s less hawkish rate hike as well as the BoE’s willingness to continue raising rates in order to maintain the recent multi-day high.
The quotation appears to be able to pare recent gains before the important statistics, despite the conflicting US data and sentiment. As predicted, the BoE increased the policy rate on Thursday by 25 basis points (bps), to 4.25%. In addition to highlighting an improvement in the Q2 GDP prediction, the policy statement predicted a slower increase in the Consumer Price Index (CPI) for the same period.
The BoE statement said, “UK banking system is well-positioned to assist the economy, including in a period of higher interest rates. However, it should be noted that the officials made it apparent they were prepared to raise rates again if inflation remained high, which helped the GBP/USD exchange rate hold its firmer position.
As opposed to expectations of 0.0 and 0.23, the US Chicago Fed National Activity Index (CFNAI) decreased to -0.19 in February. Also, compared to the prior week’s 192K claims and the 203K market expectations, weekly initial jobless claims decreased to 191K for the week ended March 18. In contrast to economists’ expectations of 1.6%, US new home sales increased by 1.1% in February from January’s 1.8%.
The US Dollar Index (DXY) was able to trim losses at the seven-week low after the US Treasury Secretary’s testimony to the House Appropriations Financial Services Subcommittee, which examined the market’s prior risk-on stance. Developing a currency other than the US dollar may be something China and Russia desire to achieve, as well as demonstrating their readiness to take additional deposit moves “if required.” US Treasury Secretary Yellen stated that “strong efforts have been taken to ensure deposits remain safe.”
In the midst of these manoeuvres, Wall Street slightly reduced intraday gains and closed in the green, while Treasury bond rates recovered but failed to close in the black.
Moving on, UK Retail Sales for February and preliminary readings of the UK and US PMIs for March will be crucial for the GBP/USD pair traders.
