GBPUSD Down 3 Cents as BOE Turns Dovish

GBPUSD has been showing resilience since June, but it has made a swift reversal in October so far, losing more than 3 cents as the BOE turns dovish. GBP/USD climbed above 1.34 last week as the USD decline escalated, but the USD turned hawkish on Powell’s comments which started the retreat, while the comments from BOE’s Bailey escalated the decline, weighing on the GBP.

The Bank of England’s decision to maintain interest rates played a key role in the British pound’s strong performance last week. GBP/USD climbed to 1.3434, its highest level since February 2022. The BoE’s choice to hold off on rate cuts supported the pound, leading to a bullish outlook against other major currencies. However, a sharp reversal occurred after comments from Governor Andrew Bailey, which sent the pair plunging 200 pips.

Bailey mentioned that if inflation data remains favorable, the central bank might adopt a more aggressive approach in cutting rates. This triggered the decline in the pound, as markets were caught off guard by long GBP positioning, which had reached a five-year high for GBP/USD. Bailey’s hint at a more forceful monetary stance led to a swift reaction in the market, with traders now pricing in a 90% chance of a 25 basis point rate cut at the BoE’s November meeting.

GBP/USD Chart Weekly – Falling Below the 200 SMA Again

UK Construction PMI for September

• Construction PMI for September rose to 57.2, significantly higher than the expected 53.3 and up from 53.6 in the previous month.

Key Findings:

• Civil engineering saw its fastest output growth since June 2021, driving overall activity.
• New orders expanded at the strongest pace in two-and-a-half years.
• Cost pressures continued to intensify in September, highlighting ongoing challenges with rising input costs.

GBP/USD Live Chart