- GBP/USD drifts lower to near 1.3615 in Thursday’s early European session.
- The Fed’s Powell described the rate cut as a risk-management measure.
- The BoE is expected to keep rates on hold at 4.0% on Thursday.
The GBP/USD pair edges lower to around 1.3615 during the early European session on Thursday, pressured by a rebound in the US Dollar (USD). The Bank of England (BoE) interest rate decision will take center stage later on Thursday, with no change in rates expected.
The Federal Reserve (Fed) decided to cut the interest rates by 25 basis points (bps) at its September meeting on Wednesday. This is the Fed’s first reduction this year and puts the target range for its main lending rate at 4.0% – 4.25%.
Fed Chair Jerome Powell indicated that Wednesday’s move to lower interest rates was a risk management cut and added that he doesn’t feel the need to move quickly on rates. This remark provides some support to the Greenback and acts as a headwind for the major pair.
On the GBP’s front, the BoE’s Monetary Policy Committee (MPC) is expected to hold rates at 4% on Thursday. This follows their last meeting in August, where they cut the rate from 4.25% to 4.0%. Financial markets are largely anticipating the UK central bank to leave rates unchanged at 4.0% for the remainder of the year, with a potential reduction only being fully priced in by April 2026.
On Friday, the attention will shift to the UK Retail Sales data for August. The headline Retail Sales is expected to show a rise of 0.4% MoM in August, while Retail Sales ex-Fuel is projected to show an increase of 0.3% during the same period. In case of a better-than-expected outcome, this could lift the Cable in the near term.
