Pound Underperforms Amid Reassessments of BoE Rate Hikes
The British Pound (GBP) is underperforming its major currency peers on Monday, trading 0.1% lower against the US Dollar (USD). The GBP/USD decline comes as traders reassess Bank of England (BoE) interest rate expectations following last Thursday's monetary policy announcement.
Deutsche Bank analysts note that investors have 'dialed back expectations for BoE hikes,' with the implied probability of a September move dropping from 60% to 30%. The market had previously priced in 31bps of hikes by year-end, but this has been tempered following the latest policy signals.
BoE Governor Andrew Bailey signaled that the current state of inflation is not as bad as thought, stating 'Encouraging that CPI is below where we thought it would be.' Meanwhile, a renewed ceasefire between the US and Iran has led to a decline in oil prices, creating a favorable market sentiment for riskier assets.
The GBP/USD pair holds above its 20-period exponential moving average (EMA) at 1.3389, reflecting a bullish near-term bias. However, the psychological level of 1.3500 is a key hurdle for British Pound bulls, and a decisive break above this could improve the odds of further upside towards the July high at 1.3558.