GBP/USD surges after BoE's unanimous pivot catches markets off guard
- Cable rallied back above 1.3400 and tested the 50-day EMA after a surprisingly hawkish 9-0 vote to hold rates.
- The BoE held rates at 3.75% in a unanimous 9-0 vote, far more hawkish than the expected 7-2 split.
- Markets are now pricing in two BoE rate hikes this year as inflation projections get revised sharply higher.
- The Fed held rates on Wednesday, still projecting one cut this year, but February PPI came in well above forecast, reinforcing the higher-for-longer narrative.
GBP/USD rallied nearly 1.3% on Thursday, climbing back above the 1.3400 handle to close around 1.3430 in a session defined by broad US Dollar weakness and a hawkish Bank of England (BoE) surprise. The pair opened near its lows close to 1.3250 before surging higher and tapping a key moving average at the session high near 1.3470. The move marks the strongest single-day rally in several weeks and partially unwinds the steep sell-off from the late-January high near 1.3870.
The Bank of England held rates at 3.75% as expected, but the unanimous 9-0 vote stunned markets that had positioned for a 7-2 split with two members favouring a cut. The previous decision in February was a narrow 5-4 hold, making Thursday's swing to full consensus a significant hawkish shift. Governor Andrew Bailey warned the BoE "stands ready to act" if inflation becomes more persistent, and the Monetary Policy Committee (MPC) revised its Q3 inflation forecast sharply higher to around 3.5%, up from 2.0% in February, driven primarily by surging energy costs from the Iran conflict. MPC member Catherine Mann said her view had shifted toward a longer hold "or even a hike," while even the traditionally dovish Swati Dhingra acknowledged rates may need to rise if oil disruption continues. Earlier in the session, UK employment data painted a mixed picture, with the ILO unemployment rate holding at 5.2% (beating the 5.3% forecast) and employment change coming in at 84K, though average earnings excluding bonuses slowed to 3.8% from 4.1%.
On the US Dollar side, the Federal Reserve (Fed) held rates at 3.50%-3.75% on Wednesday and still projects one cut this year, but Chair Jerome Powell flagged elevated uncertainty from the Iran war, and the updated dot plot showed seven of 19 officials now expect no cuts at all in 2026. The Greenback gave back Wednesday's gains on Thursday as traders digested the BoE's hawkish repricing alongside softening US new home sales, which fell 17.6% MoM.
GBP/USD daily chart
Technical Analysis
In the daily chart, GBP/USD trades at 1.3427. The near-term bias is neutral with a mild downside tilt as spot holds just below the gently descending 50-day EMA near 1.3452, while remaining comfortably above the flatter 200-day EMA around 1.3373, leaving the pair trapped in a broad mean-reversion band. Stochastic RSI has bounced from oversold territory but remains in the lower half of its range, suggesting that bearish momentum has eased without handing clear control to buyers, and price action reflects a lack of directional conviction after the recent pullback from the mid-1.36s.
Initial resistance aligns at the 50-day EMA around 1.3452, with a daily close above this level needed to open the way toward the 1.3550 area, where recent swing highs cluster. A break beyond 1.3550 would expose the 1.3620/1.3650 zone, which capped advances earlier in the month. On the downside, immediate support emerges near 1.3375, close to the 200-day EMA, and a clear move below there would shift the bias more decisively bearish toward 1.3320, followed by the 1.3250 region. Only a sustained hold above 1.3450 would start to neutralize the current downside skew and re-establish upward traction toward the recent range highs.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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