The Pound Sterling (GBP) has rebounded against major currencies following the Bank of England’s decision to maintain interest rates at 4.5%. Eight of the nine Monetary Policy Committee members voted to keep rates steady.
The BoE also raised its Gross Domestic Product forecast for the current quarter to 0.25%. Earlier, UK labour market data revealed an ILO Unemployment Rate of 4.4% and the addition of 144,000 jobs, significantly higher than December’s figure.
Challenges In Wage Growth
However, challenges arise as wage growth momentum appears to be softening amidst increased National Insurance contributions starting in April. This could influence the BoE’s monetary policy decisions.
Meanwhile, the Pound fell to approximately 1.2940 against the US Dollar, as the US Dollar Index surged to near 104.00 following the Federal Reserve’s decision to keep interest rates steady. The Fed raised its core PCE inflation forecast to 2.8% and adjusted its GDP growth estimate to 1.7% for the year.
Market players are awaiting the US Initial Jobless Claims data, which is projected to show an increase to 224,000. The GBP/USD pair is currently facing resistance as it struggles to maintain its rally above 1.3000, and key support levels are located at 1.2770 and 1.2615.
The recent Bank of England decision to keep interest rates at 4.5% has given the Pound some strength, with most members of the Monetary Policy Committee supporting the hold. That decision, combined with a GDP forecast upgrade to 0.25% for the current quarter, suggests that policymakers see some resilience in the economy.
However, the employment figures add another layer to the picture. With 144,000 jobs added, well above December’s total, we see signs of a still-active labour market. And yet, an unemployment rate of 4.4% puts pressure on expectations, particularly when one considers the rising tax burden due to higher National Insurance contributions. If earnings lose momentum in the coming months, that could affect decisions on monetary policy, particularly with inflation still a focus.
Impact Of The US Dollar Strength
Across the Atlantic, the US Dollar’s strength is creating resistance for Sterling. The Federal Reserve also left its rate untouched but adjusted its outlook, raising the core PCE inflation forecast to 2.8%. Growth expectations were set at 1.7% for the year, and that shift has reinforced dollar demand. As a result, the Pound dipped towards 1.2940 against the Dollar, while the US Dollar Index circled near 104.00.
With the market now watching US Initial Jobless Claims data, expected to rise to 224,000, any surprises there could cause volatility. The GBP/USD pair remains under pressure, struggling to hold levels above 1.3000. Key support remains at 1.2770 and 1.2615, which traders should keep an eye on as the market reacts to incoming data.
