The Bank of England’s decision to maintain interest rates at 3.75% weighs on the Pound as the Fed’s cautious stance bolsters the US Dollar.
The GBP/USD pair fell to near 1.3210, its lowest level in two months, after the Bank of England (BoE) kept interest rates unchanged at 3.75%. The Pound Sterling (GBP) struggled to gain momentum following the decision, while the US Dollar (USD) remained supported by the Federal Reserve’s cautious monetary policy stance.
Prior to the announcement, markets had priced in a high probability of the BoE holding rates steady, though some investors had anticipated a more hawkish tone. The Fed’s recent signals of a measured approach to rate cuts have kept the USD resilient, contrasting with the BoE’s more neutral posture.
The immediate reaction saw the GBP weaken against the USD, reflecting investor sentiment around diverging central bank policies.