**GBP/USD Forecast: The Pound Strengthens After BOE Announcements**
By Fiona Cincotta, Forex.com
Source: [Forex.com – GBP/USD forecast: The pound strengthens after BOE announcements](https://www.forex.com/en-uk/news-and-analysis/gbpusd-forecast-the-pound-strengthens-after-boe-announcements/)
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The British pound (GBP) staged a robust rebound against the US dollar (USD) following the Bank of England’s (BOE) latest monetary policy announcements. This development marks a significant shift for GBP/USD traders who have contended with months of uncertainty, aggressive central bank policies, and an increasingly complex macroeconomic landscape. In this article, we explore the key drivers behind sterling’s renewed strength, the details of the BOE’s decisions, technical perspectives on the GBP/USD pair, and what traders might expect in the coming sessions.
## 1. The Bank of England’s Policy Decision: Highlights
On the back of persistent inflation and evolving macroeconomic indicators, the Bank of England recently delivered its latest monetary policy update. The details shaped not only GBP/USD’s immediate movement but also expectations for the pair through the quarters ahead.
– **Policy Rate Unchanged**: The BOE kept the benchmark Bank Rate unchanged at 5.25%, aligning with broad market consensus but disappointing some hawkish corners that were bracing for an outside chance of further tightening.
– **Voting Split**: The decision saw a 7-2 split among Monetary Policy Committee (MPC) members, with two voting for a 25 basis point increase.
– **Inflation Outlook**: The MPC projected that while inflation is falling, it will remain above target for longer than previously forecast due to persistent wage growth and sticky services inflation.
– **Dovish Nuance**: The central bank struck a marginally dovish tone despite ongoing inflationary pressures, signaling that the hiking cycle is likely complete unless there are substantial surprises in the data.
– **Quantitative Tightening**: The BOE reaffirmed ongoing balance sheet reduction through gilt sales, maintaining its cautious but steady approach to policy normalization.
## 2. Pound’s Reaction to the BOE Announcement
Sterling’s reaction to the BOE’s policy meeting was swift, marked by a near-immediate reversal of prior weakness. Several factors contributed to the pound’s strength:
– **Diminished Rate Cut Bets**: Market participants dialled back expectations for near-term rate cuts, supporting GBP yield appeal versus lower-yielding peers.
– **Hawkish Hold**: Though rates were held steady, the relatively narrow margin of the vote and the central bank’s acknowledgment of inflation risks reassured markets that the BOE remains vigilant.
– **Macro Backdrop**: Improved risk sentiment globally, a softer tone from the US Federal Reserve, and some resilience in UK macro data added tailwinds for GBP.
– **Short Squeeze**: With net speculative positions in GBP/USD trending bearish for several weeks, the outcomes prompted short covering, accelerating the move higher.
## 3. Analysis of Inflation and Economic Conditions
A critical element underpinning the BOE’s decision and the market’s repricing of GBP/USD is its inflation outlook and underlying economic fundamentals.
### Inflation
– **Headline CPI** has receded markedly from its double-digit mid-2022 peak but remains above the 2% target.
– **Wage Growth**: Labour market data has shown persistent wage increases, fueling concerns about the entrenchment of inflation.
– **Services Prices**: Inflation in the services sector, a significant portion of the UK economy, has proven especially stubborn.
– **Food and Energy**: Declining food and energy costs provided some relief, but core inflation metrics remain elevated.
### Economic Growth
– **GDP**: The UK’s economic momentum has slowed, with flatlining output in recent quarters but no clear signal of a deep recession.
– **Labour
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