GBP/USD fell 0.69% as the Bank of England kept rates unchanged, with two policymakers dissenting in favor of a 25 bps hike.
The Bank of England left its benchmark rate at 3.75% in a 7-2 vote, surprising markets with a split decision. Two Monetary Policy Committee members dissented, pushing for a 25 bps hike to 4.00% amid persistent inflation concerns.
UK unemployment dipped to 4.9% in the three months to April, while wage growth remained firm at 3.4% year-over-year. The mixed labor data complicates the BoE’s balancing act between inflation control and economic growth.
GBP/USD initially plunged to 1.3205 before recovering to 1.3236, as the US dollar strengthened on hawkish Fed expectations. The dollar index (DXY) hit a one-year high at 100.85, weighing on sterling.