Investors in GBP rejoiced yesterday after the Bank of England (BoE) announced their long-awaited interest rate decision. They stated that the interest rate would be held at 0.75% and as a result the GBP rose in support. The GBP’s rise of support saw the currency edge over USD. The US dollar had previously taken advantage of GBP’s weakness as BoE rate cut odds were around a 50% chance. The GBP/USD exchange rate has now passed 1.31 during today’s trading session.
USD Loses out to GBP’s Strength as FOMC’s Rate Decision Does Little to Shift the Market
Naturally, as GBP gained support following the BoE’s interest rate decision, USD lost out. Investors had flocked to USD as a safe haven during the uncertainty surrounding GBP, but with this uncertain period now over and the outlook for the UK relatively clearer, the investors are likely to leave USD as a temporary ‘shelter’. The USD also had its own rate decision on Wednesday where the Federal Reserve decided to keep their interest rates steady, but this move was largely anticipated meaning it had little effect on the market unlike the BoE’s release yesterday.
GBP Soars as BoE Holds Interest Rates Steady
The central bank voted in favour of holding the interest rate at 0.75%. Although 2 out of 9 Committee members voted in favour of a cut, the majority saw the rate go unchanged. This was welcomed news to GBP investors who had feared the worst after interest rate cut bets were rising up to a 50-50 chance right before the decision was announced. These pre-meeting jitters caused investors to flee to safe-haven currencies like the USD as the outcome of the meeting was uncertain.
But as the result was announced, confidence was once more instilled in the GBP and investors began to return. The upward momentum of the Pound Sterling is likely to continue as the BoE re-iterates the success of the UK’s recent economic data releases. Before the BoE jitters, the market celebrated the release of both labour market and PMI data for the services sectors which came in either on target or above expectation with employment figures breaking records. The BoE wanted to remind the market that the UK economy is on the rebound and short-term growth is expected.
If you have an upcoming currency transfer would like a free quote when buying or selling dollars then contact me directly, Tom Holian, using the form below. I look forward to hearing from you.