The GBP and the USD have been quite volatile in recent months, as markets prepare for the FED and the BOE to start cutting interest rates. However, they are not certain and have been giving mixed signals in their recent policy meetings, as the Bank of England did yesterday, which has left both currencies in a limbo of sorts, with traders afraid to hold any positions for too long.

After yesterday’s meeting, it seems that the Bank of England is currently hesitant to commit to a specific monetary policy direction at the moment. JPMorgan earlier today suggested that the BOE has turned more dovish, likely influenced by lower inflation expectations from the Bank of England. Additionally, the implied rate trend based on market pricing is seen as realistic.

GBP/USD Chart Daily – Tumbled Lower After the BOE and Then Reversed Up

This cautious approach from them, along with a shift towards a more dovish stance, indicates a willingness to adapt to evolving economic conditions and external factors such as inflation expectations regarding the first rate cut either in June or August. Market pricing also reflects a consensus view that aligns with the BOE’s assessments, with GBP/USD falling 50pips initially and then reversing 70 pips higher.

On the other hand, the FED and US officials are also uncertain when to take the first step and announce a rate cut. A while ago, we had Janet Yellen speaking, after a number of FOMC members also sounded uncertain.

U.S. Treasury Secretary Yellen recently Remarks

• Inflation Trends: Yellen noted that inflation has decreased substantially, indicating a positive development in terms of price stability.
• Inflation Goals: Despite the decrease, Yellen mentioned that inflation has not yet reached the desired level, suggesting that there may still be room for improvement in achieving the target inflation rate.
• U.S.-China Relationship: Yellen highlighted a significant improvement in the relationship between the United States and China over the past 12 months. This observation suggests progress in diplomatic relations between the two countries, potentially impacting various aspects of trade, investment, and geopolitical dynamics.

GBP/USD Live Chart