Noor Trends News, Technical Analysis, Educational Tools and Recommendations
The GBP/USD pair has registered losses on Thursday. The pair is trading at 1.2285, following the BoE’s decision to hold rates unchanged amid slowing UK inflation.
US economic data reveals a mixed landscape with lower-than-expected Initial Jobless Claims and a plunge in the Philadelphia Fed Manufacturing Index.
Given the solid US economy and rate differences, GBP/USD will likely continue its downward trajectory soon.
The British Pound registers solid losses against the US dollar after the Bank of England’s decision to hold rates unchanged in a 5-4 vote split, with BoE’s Governor Bailey providing the decisive vote.
A slowdown in UK inflation, reported on Wednesday, was the main driver behind BoE’s decision. The GBP/USD is trading at 1.2295 after hitting a daily high of 1.2331.
GBP/USD drops to 1.2300 as BoE holds rates and US economic data paints a mixed picture
Earlier, the BoE decided to hold rates unchanged at 5.25% due to the deceleration of inflation, a loosening labour market, and a deterioration in business sentiment.
The BoE added that rates would remain high for an extended period and “Further tightening would be needed if evidence of more persistent inflationary pressures.”
Bailey and Co. updated their GDP forecasts, and for the Q3, the economy is expected to grow by 0.1%, below the 0.4% August estimate, underscoring that growth in the year’s second half would be weaker. The BoE would also tweak its quantitative tightening program from £80bn to £100bn.
The BoE’s decision hurt the GBP/USD upside prospects, as the pair was already downward pressured after the Federal Reserve decided to hold rates unchanged but revised the interest rates for 2024 upward. In the Summary of Economic Projections (SEP), Powell and his colleagues updated the dot plots, with most Fed officials expecting to keep rates above the 5% threshold in the next year.
Data-wise, the US economic docket featured Initial Jobless Claims for the last week, which rose by 201K below estimates of 225K, and drafts a solid labor market. Further data revealed that the September Philadelphia Fed Manufacturing Index plunged -13.5, well below forecasts for a -0.5 contraction. US Existing Home Sales data was worse than expected, at -0.7% MoM, beneath projections of 1.5% expansion.
Upon this backdrop, the GBP/USD would continue to trend lower as the US economy remains solid. Also, the rate difference between the US and the UK suggests further downside is expected.
