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Pound slides to six-month lows as BoE puts rate hikes on ice 


The British pound (GBP/USD) saw a nearly 1% decline, reaching $1.22 — its lowest level since March — after the Bank of England (BoE) decided to keep interest rates unchanged during its September meeting, ending a sequence of 14 consecutive interest rate hikes. 

The market had been divided between expecting another rate increase and anticipating a pause in the tightening cycle, especially following the unexpected drop in the inflation rate the previous month. 

However, the central bank did acknowledge the need for further tightening in monetary policy if there were indications of more persistent inflationary pressures. Nonetheless, among the nine policymakers, four voted in favor of a rate hike during the meeting, indicating a tight 5-4 vote. 

Traders are currently assigning a roughly 64% likelihood that the central bank will implement a 25-basis point interest rate increase in November — a decrease from the 81% probability anticipated prior to the decision. 
James Smith, an economist at Dutch bank ING, reviewed the meeting: 

“The Bank of England has voted to keep rates on hold, and we suspect that means the tightening cycle is now over. What’s striking, though, is just how close the decision was, with a 5-4 split on the committee between those wanting ‘no change’ and those opting for a 25bp rate hike. That degree of division is actually pretty unusual and shows just how close a call this meeting was.


What’s very clear is that the Bank is leaving all options on the table for November. Remember, the BoE has three key metrics for setting policy right now – services inflation, private sector wage growth, and the vacancy-to-unemployment ratio. It was the former of those variables that presumably convinced the committee to pause today, now that services inflation is noticeably below the Bank’s most recent forecasts from August.”

As of 14:40 p.m. CET, the pound to dollar rate stood at $1.224, down 0.74%. 

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GBPUSD forecasts: BoE signals higher-for-longer rates, sinks pound 


“The BoE thinks they have done enough,” Mark Nash, head of fixed income alternatives at Jupiter Asset Management, told Bloomberg. “But they are taking risk with inflation as the pound is falling.” 

Before the BoE meeting on Thursday, the pound had already shown the weakest performance compared to other major currencies this month, having shed close to 3% of its value against the greenback. It faced additional downward pressure following the Federal Reserve meeting on Wednesday. While the Fed maintained its target range for the federal funds rate at a 22-year high of 5.25%-5.5% on September 20th, in line with market expectations, it also hinted at the possibility of another rate hike this year, providing a boost to the dollar

At the time of writing, the U.S. Dollar Index (USDX) was trading at 105.7, up by 0.5% from the previous day. 

ING’s James Smith wrote that the BoE would likely pause its monetary tightening cycle in the upcoming months, which could then have a negative impact on the pound: 

“We think the Bank will remain on hold for the foreseeable future. We don’t rule out a hike in November, but it will probably require a big upside surprise to either the services inflation or wage data. Formally, policymakers are telling us that further tightening is possible, and it could well be that the Bank privately wants to take a leaf out of the Fed’s book by ‘skipping’ September’s meeting in a bid to draw out the current tightening cycle. There’s little evidence of that in today’s policy statement, though.”

In his overview of the decision, Chief Market Analyst said the BoE’s message was higher-for-longer, although it couldn’t be classed as a “hawkish hold” similar to the Fed: 

“Market reaction clear enough with GBPUSD making a fresh daily low and new 6-month low around 1.22343, FTSE 100 – which was trading down on a broadly risk-off session post-Fed — jumping above 7,746 before trimming daily gains to trade flat at 7,730 and then giving back some more to retest 7,700 support. FTSE 250 also rallied before giving back gains – is the bad news on growth meaning good news on rates? Probably not since the message is higher for longer.

I don’t know if we categorise this as a hawkish hold – what's appears clear is that the BoE saw the CPI print coupled with soft growth figures and thought it’s enough to warrant holding fire for the time being. The vote was split 5-4, a tight call that was reflected in the market pricing ahead of the event.”


The pound to dollar forecast from Australian bank Westpac, last updated on September 15, saw the pair trading at $1.27 in December 2023, $1.28 in March 2024, and $1.29 in June 2024, indicating a potentially bullish trajectory for GBP. 

Economic data aggregator TradingEconomics was bearish on the pound in its most recent GBP forecast, projecting cable to possibly reach $1.21 by the end of this quarter. The platform’s 12-month pound forecast estimated the currency to trade at a potential $1.14 by September 2024.  

When considering foreign currency (forex) for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.  

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