GBP/USD climbs after Bank of England cuts rates

The British pound has rebounded on Thursday. In the North American session, GBP/USD is trading at 1.2983, up 0.81% on the day. A day earlier, the pound took a drubbing, sliding 1.2%.

BoE cuts rates by 0.25%

There was no surprise as the Bank of England lowered the key interest rate by 0.25% to 4.75%. The markets had priced in the move at close to 100% and the Monetary Policy Committee voted 8-1 in favor of the cut, with one member voting to hold rates at 5%.

The BoE has now lowered rates twice since its easing cycle in August. BoE policymakers had signaled that a rate cut was coming, as September inflation dropped sharply to 1.7%, the first time in over three years that inflation dropped below the BoE’s target of 2%.

The central bank is expected to lower rates gradually in modest increments of 25 basis points in the coming months, but last week’s UK budget could complicate things. The budget included tax hikes and increased spending, which is expected to boost inflation. That could mean a pause at the next BoE meeting in December and a slower pace of rate cuts next year.

The Federal Reserve meets later today, in the shadow of the dramatic US election, in which Republican Donald Trump cruised to a surprisingly easy victory over Democrat Kamala Harris. The Fed is virtually certain to trim rates by 0.25% to 4.5%-4.75%. With inflation easing, the Fed is expected to continue its rate-cutting cycle into 2025.

GBP/USD Technical

• GBP/USD pushed above resistance at 1.2920 earlier and then tested resistance at 1.3007
• There is support at 1.2793 and 1.2706

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