The unabated rally in the US Dollar maintains the price action in the risk complex depressed in the first half of the week, sending GBP/USD to new lows near 1.2730 and exposing it to a deeper pullback in the short-term horizon.
GBP/USD gathered bullish momentum on Thursday and erased a large portion of Wednesday's losses. The pair, however, lost its traction after failing to stabilize above 1.3000 and was last seen trading in negative territory near 1.2950.
The Bank of England (BoE) said on Thursday that it cut the bank rate by 25 basis points (bps) to 4.75%, with eight policymakers voting in favor of the decision, against Catherine Mann, who voted to leave the policy rate unchanged at 5%. This decision came in line with the market expectation.
In its policy statement, the BoE announced that it revised its forecast for the Consumer Price Index inflation in one year's time to 2.7% from 2.4% in August's projections, adding that the new budget is provisionally expected to boost inflation by just under 0.5 percentage points at peak between mid 2026 and early 2027. The revision to inflation projections helped Pound Sterling stay resilient against the US Dollar (USD).
In the second half of the day, the Federal Reserve (Fed) lowered the policy rate by 25 bps to the range of 4.5%-4.75%. The US central bank repeated in the policy statement that risks to the job market and inflation were "roughly in balance." In the post-meeting press conference, Fed Chairman Jerome Powell refrained from hinting whether they will opt for another rate cut in December. When asked about Donald Trump's victory in the presidential election, Powell explained that the results of the election will not have an effect on the monetary policy in the near term. GBP/USD retreated slightly from the session highs after the event but still ended the day with a gain of more than 0.8%.
Early Friday, the cautious market stance makes it difficult for GBP/USD to build on Thursday's gains. At the time of press, US stock index futures were trading mixed. If risk flows return ahead of the weekend, the USD could have a hard time finding demand and open the door for an extended rebound in GBP/USD.
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