This week, the British pound (GBP) outshined its peers, benefiting from the Bank of England’s (BoE) decision to maintain interest rates. By Friday, GBP/USD reached its highest level in nearly two years, trading just above 1.3340. The BoE’s decision to leave policy constraints in place, while refraining from aggressive easing, has kept the pound supported. As a result, the GBP remains on a strong footing, with a bullish outlook against most other major currencies.
GBP/USD Daily Chart – The 200 SMA Has Turned Into Support Now
BoE’s Gradual Approach to Easing
A key takeaway from the BoE’s stance is the continued emphasis on keeping interest rates high for an extended period, suggesting that the central bank is in no rush to lower policy rates. This gradual approach implies a slow easing of monetary policy over time, which is supportive of the pound in the current environment. Meanwhile, the US dollar (USD) did not benefit as much from the rise in Treasury yields. The Federal Reserve has initiated its easing cycle by cutting interest rates by 50 basis points, as expected. However, this move, while anticipated, was viewed as dovish, which weighed on the USD.
GBP/USD at a Two-Year High
Following the BoE and Fed announcements, GBP/USD surged to its highest level since February 2022. The daily chart reflects a significant rally in the pair, driven by the BoE’s decision to maintain its neutral stance on monetary policy. Large financial institutions like Credit Agricole have now identified the pound as a potential high-yield currency, backed by the BoE’s approach to rates.
Interest Rate Advantage for the Pound
Looking ahead, the pound could remain supported due to its rate advantage over other major currencies. The market has already adjusted its expectations for further rate cuts by the BoE at the November and December meetings, indicating a less dovish outlook from the central bank. However, the pound’s strength may be vulnerable to profit-taking if upcoming data—such as retail sales or fiscal reports—disappoints. While the GBP remains attractive in the short term, any negative surprises in key economic indicators could lead to a temporary pullback.
GBP/USD Live Chart
GBP/USD