The Bank of England decided yesterday to cut interest rates by 25 basis points, as widely expected, bringing the rate down to 4.00%. What stood out, however, was that four out of the nine Monetary Policy Committee (MPC) members voted to keep rates unchanged—significantly higher than the one member markets had anticipated. Conversely, five members voted in favor of the cut, while expectations had been for eight to support the move.
This highlights a sharp division within the MPC, with hawkish voices still advocating against rate cuts, which had a positive impact on the British pound.
The GBP/USD pair reached 1.3453 today, its highest level since July 25, 2025. It has risen by nearly 2% from the low recorded on August 1, 2025, at 1.3141, up to the recent peak of 1.3453. The pair is currently trading near the 1.3400 level and is up approximately 7% year-to-date.
In June, the UK’s annual headline Consumer Price Index (CPI) rose by 3.6%, exceeding both expectations and the previous reading of 3.4%. The core CPI, which excludes food and energy, increased by 3.7%, also above both the forecast and prior reading of 3.5%. Inflation in the UK remains well above the Bank of England’s 2% target.
On the other hand, labor market data showed signs of softening. The unemployment rate rose from 4.6% to 4.7%, and average earnings including bonuses declined from 5.4% to 5.0%. This divergence between persistent inflation and weakening employment indicators has led to a split in views among central bank members over whether to continue with rate cuts or hold steady.
Another key factor supporting the bullish momentum of the GBP/USD pair is the broad weakness of the US dollar against most major currencies.
From a technical standpoint, if the pivot point at 1.3416 for the AUD/USD pair is broken, the price may target support levels at 1.3379, 1.3307, and 1.3270. If the price breaks above the pivot, it could aim for resistance levels at 1.3488, 1.3525, and 1.3597.
The Relative Strength Index (RSI) currently stands at around 51, indicating positive momentum for the GBP/USD pair. Moreover, a bullish crossover between the MACD line and the signal line further reinforces the upward momentum for the pair.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
