GBP/USD fell after the BoE’s dovish stance last week


The pair traded with losses of 0.16%, as the divergence of the central bank and interest rate differences favored the Dollar.

The DXY hit a new annual high of 106.09, reflecting the strength of the US economy, while prospects for a soft landing are growing.

Despite keeping rates unchanged, the Fed adopted a hawkish stance, as witnessed by the reaction of financial markets.

the British Pound Sterling (GBP) remains under pressure after the Bank of England’s (BoE) surprise decision to keep rates unchanged, spooking traders, who were expecting further tightening. US Treasury Yields Hit Multi-Year Highs, Supporting the US dollar (USD)as seen in the GBP/USD pair trading at 1.2215, registering a loss of 0.16%.

Sterling defied the Bank of England’s dovish stance on slowing inflation, but risks to growth fell to the downside.

Last week there was broad weakness in the British Pound Sterling (GBP) after the data showed a slowdown in inflation. The Bank of England reacted accordingly, keeping the bank rate at 5.25%, although it stressed that other meetings remained open, meaning the BoE could raise or stop rates if necessary.

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Other data released that week was that retail sales beat estimates but were unchanged from July’s data, while S&P Global/CIPS PMIs showed further deterioration in business activity. Therefore, the pound sterling will continue to be under pressure in the face of an impending economic recession.

Across the pond, the US economy remains strong, as last week’s data showed, while the Federal Reserve’s decision to hold stocks and wait for another interest rate hike kept investors focused. to dollars. US Treasury yields soared to multi-year highs, while the Dollar marked a new year-to-date high, according to the Dollar Index (DXY), at 106.09.

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The heads of the Federal Reserve central banks adopted a cautious stance, especially the presidents of the Boston and San Francisco Fed, Susan Collins and Mary Daly. Both stressed that the Fed should be patient with monetary policy, but did not rule out another rate hike. Recently, Chicago Fed President Austan Goolsbee stated that a soft landing is possible, but inflation risks remain tilted to the upside.

The future of the money market remains doubtful of an increase in the Fed rate, as indicated by CME’s FedWatch tool, with 25 basis points increase in probabilities of 21% for November, 34.2% for December and 35.9% . % in January 2024. However, the interest rate differential favoring the Fed will soon weigh on GBP / USD and cause the pair to sink to the 1.2000 figure.

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GBP/USD Price Analysis: Technical Perspective

The daily chart shows the pair struggling to break below the 1.2200 figure, although it remains below the 200 and 50-day moving averages (DMA), a bearish sign. If traders drag prices below that level, the next stop for GBP/USD is the March 15 low of 1.2010 before 1.20. Conversely, if the pair recovers to the 1.2300 level, a recovery towards the 200-DMA at 1.2432 will occur.

Gbp/Usd Fell After The Boe'S Dovish Stance Last Week


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