The British pound is slightly lower on Thursday. In the European session, GBP/USD is trading at 1.2766, down 0.16%.
BoE expected to hold rates
The markets will shift focus from the Federal Reserve, which maintained rates on Wednesday, to the Bank of England, which is holding its rate meeting later today.
The BoE is widely expected to maintain the cash rate at 5.25% at today’s meeting but investors will be looking for signals of a rate cut, especially after the inflation report on Wednesday, which was lower than expected.
The central bank hasn’t jumped on the rate-cut bandwagon, although the markets have priced in an initial rate cut in June. The sharp fall in both headline and core CPI for March won’t affect today’s meeting but could prod the Monetary Policy Committee to hint at a rate cut. If the MPC provides such a hint, it would likely weigh on the British pound.
It should be remembered that at the previous meeting in February, two of the nine MPC members voted for a rate increase, which shows that some policy makers are concerned that inflation could rebound if the BoE cuts rates too soon.
Federal Reserve maintain rates, remains cautious
The Federal Reserve held the benchmark rate at a target range of 5% to 5.25%, as was widely expected. The Fed maintained its projection of three rate cuts this year and revised its GDP forecast for 2024 to 2.1%, up from 1.4% in December. Fed Chair Powell acknowledged that inflation was falling and the US economy was strong, but said that the Fed would not start to cut rates until it was clear that inflation was moving sustainably towards the 2% target.
GBP/USD Technical
- GBP/USD is putting pressure on support at 1.2753. Below, there is support at 1.2718
- There is resistance at 1.2820 and 1.2855
