Pound Sterling declines after BoE's dovish hold

The Pound Sterling declines as four BoE MPC members voted to reduce interest rates against the three expected.
The BoE has kept interest rates steady at 4% and expects upside inflation risks to ease ahead.
US ADP Employment Change and ISM Services PMI data for September beat estimates.

The Pound Sterling (GBP) faces intense selling pressure against its major currency peers on Thursday after the Bank of England’s (BoE) monetary policy announcement. The BoE has kept interest rates steady at 4%, as expected. However, the number of Monetary Policy Committee (MPC) members supporting the BoE to maintain the status quo has come in lower than expected.

Out of the nine-member-led MPC committee, four officials supported a 25-basis-point reduction in interest rates to 3.75% against three. BoE policymakers: Sarah Breeden, Dave Ramsden, Swati Dhingra, and Alan Taylor supported an interest rate cut.

Meanwhile, the BoE has stated that upside risks to inflation have begun to recede, and weaker demand could impact near-term inflation. "The risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand has become more apparent," the BoE said in the monetary policy statement.

The BoE has kept the room open for further interest rate cuts if price pressures continue to decelerate. "If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path," the BoE said.

Going forward, investors will pay close attention to BoE Governor Andrew Bailey's press conference to get more cues on the economic outlook in the wake of possible tax raises in the upcoming Autumn Budget, which will be announced later this month.

In the Autumn Budget, UK Chancellor of the Exchequer, Rachel Reeves, is likely to announce tax hikes in the upcoming Autumn Budget later this month.

UK Chancellor Reeves is expected to break her self-imposed rules of not raising taxes on working people and avoid borrowing to fund day-to-day public spending to plug a £22bn shortfall in the government's finances.

Pound Sterling Price Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.30%	-0.18%	-0.31%	-0.10%	-0.13%	0.01%	-0.25%
EUR	0.30%		0.12%	-0.02%	0.20%	0.17%	0.31%	0.05%
GBP	0.18%	-0.12%		-0.12%	0.09%	0.06%	0.20%	-0.06%
JPY	0.31%	0.02%	0.12%		0.21%	0.19%	0.31%	0.08%
CAD	0.10%	-0.20%	-0.09%	-0.21%		-0.02%	0.10%	-0.15%
AUD	0.13%	-0.17%	-0.06%	-0.19%	0.02%		0.14%	-0.12%
NZD	-0.01%	-0.31%	-0.20%	-0.31%	-0.10%	-0.14%		-0.26%
CHF	0.25%	-0.05%	0.06%	-0.08%	0.15%	0.12%	0.26%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Daily digest market movers: Pound Sterling surrenders some early gains against US Dollar

The Pound Sterling gives back some of its early gains against the US Dollar (USD) after the BoE's interest rate announcement. Still, the GBP/USD pair is up 0.15% to near 1.3070 during the late European trading session on Thursday.
The pair gains as the US Dollar’s rally hits a pause after the release of the United States (US) ADP Employment Change and ISM Services Purchasing Managers’ Index (PMI) data for October.
At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades subduedly around 100.05.
On Wednesday, the US ADP Employment figures showed that the private sector added fresh 42K fresh jobs in October, higher than estimates of 25K. In September, employers laid off 29K workers. The US ISM Services PMI came in at 52.4, the highest level seen in eight months.
Theoretically, upbeat US data releases strengthen the US Dollar’s appeal. Therefore, a slight correction in the Greenback appears to be short-lived,barring other things remaining constant.
Meanwhile, receding Federal Reserve (Fed) dovish expectations for the December monetary policy meeting are expected to strengthen the US Dollar.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in December's meeting has eased to 62.5% from 94.4% seen before the monetary policy announcement on October 29.
Last week, Fed Chairman Jerome Powell commented in the press conference following the monetary policy announcement that the December rate cut is “far from a foregone conclusion” as officials had “strongly different views” in the meeting, adding that the takeaway is “we haven't made a decision about December”.

Technical Analysis: Pound Sterling holds immediate support of 1.3000

The Pound Sterling gains to near 1.3085 against the US Dollar on Thursday. The GBP/USD pair holds its over six-month low around 1.3000 posted on Tuesday. The overall trend of the pair remains bearish as it trades below the 200-day Exponential Moving Average (EMA), which is around 1.3263.

The 14-day Relative Strength Index (RSI) slumps below 30.00, indicating that the overall momentum is bearish.

Looking down, the April low near 1.2700 will act as a key support zone. On the upside, the October 28 high around 1.3370 will act as a key barrier.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.