GBP/USD has posted gains on Thursday, continuing the upward movement which marked the Wednesday session. In North American trade, the pair is trading at 1.2360. On the release front, the BoE maintained the benchmark lending rate at 0.25%. The vote was expected to be unanimous, but one MPC member voted in favor of raising rates by a quarter-point. In the US, Building Permits fell to 1.21 million, missing the estimate of 1.26 million. The Philly Fed Manufacturing Index dropped sharply to 32.8, above the forecast of 30.2 points. On the labor front, unemployment claims ticked down to 241 thousand, beating the forecast of 245 thousand. On Friday, the US will publish the UoM Consumer Sentiment report.
There was a surprise from the Bank of England on Thursday. The Monetary Policy Committee did not alter interest rates, which have been pegged at 0.25 percent since August 2016. However, one member of the MPC, Kristen Forbes, voted in favor of a 0.25% rate hike, while the other 8 members voted to maintain rates at their current level. This move helped boost the pound above 1.2350 for the first time since March 1. The markets had predicted that the vote in favor of maintaining the rate would be unanimous at 9-0. The BoE is likely to face more pressure to raise rates, as inflation continues to climb. The minutes acknowledged higher inflation levels, noting that inflation could exceed the 2% target by the summer, given the depreciation in the British pound.
There were no raised eyebrows when the Federal Reserve raised rates by a quarter-point on Wednesday, as the markets had priced a rate hike at over 90%. The rate hike, the second in just three months, raised the raised the benchmark lending rate to a 0.75%-1% range. What was not expected, however, was the sharp drop of the dollar against its major rivals. The markets were hoping that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening. There was disappointment as Fed Chair Janet Yellen reiterated that further rate hikes would be done gradually, pushing the dollar on Wednesday. As well, the US dollar may have lost ground due to traders and investors acting on "buy on rumor, sell on fact". This larges-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower, with the pound gaining 1.7 percent since the Fed announcement.
