GBP/USD Gains Ground Amid BoE Rate Hike and US Economic Data

During the early Asian session on Friday, the GBP/USD pair shows a promising outlook as it breaks a four-day losing streak and records a 0.17% gain, currently trading at 1.2730.

Arslan Butt•Friday, August 4, 2023•1 min read

During the early Asian session on Friday, the GBP/USD pair shows a promising outlook as it breaks a four-day losing streak and records a 0.17% gain, currently trading at 1.2730.

In response to soaring inflation, the Bank of England (BoE) raised interest rates by 25 basis points (bps) to 5.25% during its August policy meeting on Thursday. This rate increase, reaching a 15-year high, aligns with market expectations of two additional rate hikes by year-end, considering that the June UK Consumer Price Index (CPI) surged to 7.9%. This figure is almost four times higher than the BoE’s targeted 2% and more than double the US rate.

BoE Governor Andrew Bailey emphasized the central bank’s projection that inflation will ease to around 5% in October, while also underscoring that there is no predetermined path for interest rates.

Conversely, on the US Dollar front, the US Department of Labor reported a rise in Initial Jobless Claims to 227,000 for the week ending July 29, meeting market expectations. Additionally, the ISM Service PMI for July declined to 52.7 from the previous 53.9, falling short of the anticipated 53. Moreover, Unit Labor Costs for Q2 came in at 1.6%, lower than the expected 2.6%.

Market participants remain vigilant as they await the release of the US Nonfarm Payrolls report later in the day, as it is likely to provide valuable insights into the potential future direction of the GBP/USD pair. Furthermore, the Unemployment Rate and Average Hourly Earnings will be disclosed on Friday. Given the absence of substantial economic data from the United Kingdom, investors are attentively digesting the BoE meeting statement, while the GBP/USD pair’s dynamics are primarily driven by the movements of the US Dollar.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.