Pound Sterling rebounds as investors start digesting BoE's lower GDP forecast
- The Pound Sterling gains to near 1.2460 against the USD ahead of the US NFP data for January.
- Investors expect the US NFP to drive market expectations for the Fed’s monetary policy outlook.
- BoE’s Catherine Mann surprisingly supported a bigger interest rate reduction of 50 bps.
The Pound Sterling (GBP) strives to gain ground against its major peers on Friday after a sharp sell-off on Thursday. The British currency discovers some buying interest as investors start digesting the outcome of the Bank of England’s (BoE) policy meeting. Investors dumped the British currency the prior day after the BoE meeting in which the central bank reduced interest rates by 25 basis points (bps) to 4.5% and revised Gross Domestic Product (GDP) forecast for the year to 0.75%, lower from 1.5% projected in November.
Investors had anticipated a 25 bps interest rate reduction, with an 8-1 vote split, but all officials supported easing the monetary policy further. However, the notable reason behind the sharp sell-off in the Pound Sterling was Monetary Policy Committee (MPC) member Catherine Mann, an outspoken hawk, joining official Swati Dhingra and favoring a bigger rate cut of 50 bps. This scenario indicated how much policymakers are concerned over the economic outlook.
BoE Governor Andrew Bailey guided a cautious and gradual rate cut approach and warned that, due to higher energy prices, inflation could temporarily rise to near 3.7% in the third quarter of the year before falling back to the 2% path.
BoE’s interest rate cut decision is expected to bring a big relief to the United Kingdom (UK) Chancellor of the Exchequer Rache Reeves, as it will stimulate economic growth. Still, downwardly revised GDP growth appears to be a wake-up call for her. Last week, Reeves was very optimistic about her economic plans, including a new runway at Heathrow Airport.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | -0.08% | 0.40% | 0.13% | 0.00% | -0.04% | 0.25% | |
| EUR | -0.09% | -0.16% | 0.28% | 0.05% | -0.08% | -0.12% | 0.18% | |
| GBP | 0.08% | 0.16% | 0.45% | 0.19% | 0.08% | 0.04% | 0.33% | |
| JPY | -0.40% | -0.28% | -0.45% | -0.28% | -0.40% | -0.47% | -0.16% | |
| CAD | -0.13% | -0.05% | -0.19% | 0.28% | -0.14% | -0.17% | 0.13% | |
| AUD | 0.00% | 0.08% | -0.08% | 0.40% | 0.14% | -0.05% | 0.26% | |
| NZD | 0.04% | 0.12% | -0.04% | 0.47% | 0.17% | 0.05% | 0.29% | |
| CHF | -0.25% | -0.18% | -0.33% | 0.16% | -0.13% | -0.26% | -0.29% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily digest market movers: Pound Sterling gains against USD ahead of US NFP
- The Pound Sterling rises to near 1.2460 against the US Dollar (USD) in Friday’s European session ahead of the United States (US) Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower to near 107.60.
- Investors will pay close attention to the US official employment data, which is expected to influence market speculation about how long the Federal Reserve (Fed) will keep interest rates steady in the range of 4.25%-4.50%.
- On Thursday, Dallas Fed Bank President Lorie Logan said she would support holding interest rates for “quite some time” until the “labor market doesn’t falter” even if inflationary pressures decelerate closer to the central bank’s target of 2%.
- Last week, Fed Chair Jerome Powell also said that monetary policy adjustments won’t be appropriate until the central bank sees “real progress in inflation or at least some weakness in labor market”.
- The US NFP report is expected to show that the economy added 170K workers in January, significantly lower than 256K in December. The Unemployment Rate is seen steady at 4.1%. Investors will also focus on the Average Hourly Earnings data, a key measure of wage growth that drives consumer spending. The wage growth measure is estimated to have decelerated to 3.8% year-on-year from 3.9% in December, with monthly figures growing steadily by 0.3%.
- Meanwhile, the uncertainty over US President Donald Trump’s tariff agenda will also keep investors on their toes. Market participants expect President Trump to target Europe next for imposing tariffs.
Technical Analysis: Pound Sterling strives to break above 50-day EMA
The Pound Sterling moves higher to near 1.2460 against the US Dollar on Friday. The outlook of the GBP/USD pair remains weak as the 50-day Exponential Moving Average (EMA) continues to act as a resistance at around 1.2500.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, suggesting a sideways trend.
Looking down, the January 13 low of 1.2100 and the October 2023 low of 1.2050 will be key support zones for the pair. On the upside, the December 30 high of 1.2607 will act as key resistance.
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