In recent months, the British pound sterling (GBP) has found itself on a slippery slope against the resurgent US dollar, currently languishing at a near four-month low.
However, amidst this decline, all eyes are firmly fixed on the upcoming Bank of England (BOE) policy meeting scheduled for Thursday, September 21.
Market sentiment is divided in expectations over a potential interest rate hike – a move that could offer the beleaguered pound a much-needed shot in the arm. Typically, higher interest rates have the potential to elevate a nation’s currency, offering a glimmer of hope for GBP’s fortunes.
At the moment, the sterling remains under pressure, with the USD/GBP currency pair sitting at 0.81, the lowest since June 2023 for the UK currency in forex trading.
Why is GBP losing trending lower?
The British pound has recently come under pressure due to a mix of factors, including the growing uncertainty around the UK’s economic outlook, and most recently, an unexpected drop in the country’s inflation rate.
The UK’s consumer price index (CPI) showed that inflation tumbled to an 18-month low of 6.7% in August, raising the odds of a possible rate hike pause.
While the Bank of England’s decision will be announced on Thursday, investors are currently seeing a 50-50 chance of rates staying put.
Having said that, both decisions could have a significant impact on the GBP’s performance. In particular, another rate increase could elevate the British pound from its current lows against the greenback.
On the other hand, a ‘no rate hike’ scenario could potentially pave the way for further downside in the sterling.
USD/GBP technical analysis
Notably, the summary of 1-day gauges on the platform is signaling a ‘buy’ for USD/GBP, with 13 indicators suggesting a ‘buy,’ 7 being ‘neutral,’ and just 5 showing a ‘sell.’
Meanwhile, the Federal Reserve is also set to announce its monetary policy decision on September 20, although markets are widely expecting a pause, meaning that USD is unlikely to gain further momentum from the meeting.
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