The GBP/USD currency pair was on a downward trend due to the stronger US dollar, but rallied higher after the Bank of England announced its rate decision. The US dollar later gained slightly against the British pound after the release of positive US data such as the initial jobless claims.
The currency pair gained about 100 points after the BoE rate announcement, but has since retraced some of its gains.
The release of the UK retail sales figures for May released by Office for National Statistics indicated a decline of 1.6% versus the expected 1.0% decline. The annualized figure recorded a 0.6% increase as compared to the market consensus of a 1.9% increase. The announcement of the BoE rate decision triggered a rally in the GBP/USD pair as the markets reacted to the fact that three Monetary Policy Committee members voted for a 25 bp rate hike. Although the BoE left rates unchanged, the vote results indicated to the markets that a BoE rate hike might happen soon.
The positive US economic data such as the initial jobless claims data released by the Department of Labor, which came in at 237,000 versus the expected 241,000, caused the pair to retrace some of its gains. The NY Empire State manufacturing index also exceeded expectations by coming in at 19.8 versus the expected 5.
The currency pair’s future performance is likely to be affected by political events in the UK related to Theresa May‘s government including the Brexit negotiations with the EU.
The GBP/USD was trading at 1.2765 as at 15:46 GMT having dropped from a daily high of 1.2795. The GBP/JPY was trading at 141.30 having risen from a low of 139.16.
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