Sterling was in trouble during Thursday’s trading session, with prices crashing towards 1.3120 after the Bank of England left interest rates at a record low of 0.25% in August’s policy meeting. The unsavory combination of uninspiring UK economic data in July and uncertainty surrounding Brexit talks, has pressured BoE hawks and dented expectations of a rate hike occurring anytime soon.
With the central bank downgrading its UK GDP growth forecast for both this year and 2018, Sterling is poised for further punishment down the road. Inflation estimates were also lowered to 2.58% next year, while the forecast for wage growth in 2018 and 2019 was trimmed to 3% and 3.25%, respectively.
With political uncertainty, soft economic fundamentals and ongoing Brexit concerns weighing heavily on the UK economy, investors may start to question whether the BoE moves forward with raising rates in 2018. The sharp depreciation of the British Pound following the interest rate decision continues to highlight how the currency has become increasingly reactive to monetary policy speculations.
From a technical standpoint, the GBPUSD bulls have been living on borrowed time and using Dollar weakness as a foundation to elevate prices. With Sterling bears inspired by BoE doves, the GBPUSD is likely to trade towards 1.3000 once 1.3100 is conquered.
