The British pound (GBP) rose by 0.26% on Tuesday, reaching a new 2.5-month high as the Bank of England’s (BOE) Governor gave some hawkish statements.
Possible effects for traders
During yesterday’s Monetary Policy Hearings in the British Parliament, the BOE Governor Andrew Bailey said that the central bank’s stance on monetary policy should remain ‘restrictive’. Bailey also said it’s ‘far too early to be thinking about rate cuts.’ ‘They (the Bank of England) are trying to retain the option to hike again if needed and at a minimum delay markets pre-emptively pricing any easing,’ said Simon Harvey, head of FX analysis at Monex Europe. According to Reuters, JP Morgan, a major U.S. investment bank, expects the BOE to start decreasing interest rates only in Q4 2024. Fundamentally, there is a bullish divergence between the U.K. and the U.S. monetary policies, which contributed to GBPUSD’s rise by 3.5% in November.
GBPUSD was falling slightly in the Asian and early Europen trading sessions. Today, traders should focus on the U.S. macroeconomic reports: Jobless Claims and Durable Goods orders at 1:30 p.m. may trigger increased volatility. Weaker-than-expected reports may widen the bullish divergence in countries’ monetary policies, potentially pushing GBPUSD towards 1.26000. However, higher-than-expected numbers may pull GBPUSD towards 1.24400.
