GBP/USD loses ground following the BoE’s decision to deliver a 25-basis point rate cut.
BoE Governor Andrew Bailey noted that the overall inflation trajectory is closer to the 2% target compared to the median forecast.
The recent US PMI data have created a complex situation, highlighting an economic slowdown and increased odds for a Fed rate cut.
GBP/USD extends its losses following the Bank of England‘s (BoE) decision to deliver a broadly expected 25-basis point rate cut at its August meeting held on Thursday. The GBP/USD pair trades around 1.2720 during the Asian session on Friday.
BoE Governor Andrew Bailey explained the decision to reduce the policy rate to 5% and addressed media questions. Bailey noted that the increase in the minimum wage has not been detrimental from their viewpoint. According to Bailey, while firms often cite higher minimum wages as compressing pay scales, the overall inflation trajectory, including upside risks, is now closer to the 2% target compared to the median forecast.
The US Dollar (USD) may advance against its peers due to increased risk aversion. Recent manufacturing and labor market data have erected a complex situation involving an economic slowdown in the United States (US) and increased expectations for a Federal Reserve rate cut. If the economic downturn becomes too severe, it could negatively impact market sentiment, rendering any rate cuts from the Fed irrelevant.
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