Sterling Soars Against Dollar on 25 BPS BoE Rate Hike

Sterling touched the 1.3628 high against the greenback in the mid-London session on Thursday, following the interest rate decision from the BoE. According to forecasts, the Bank of England raised its prime rates by 25 basis points (bps) to 0.50% to tackle the growing inflation risk in the region. With the US dollar remaining under intense pressure, cable bills appear to have taken control of affairs as 1.3650 comes into focus.

The GBP/USD pair has now recorded its fifth-consecutive daily climb since it slumped to the 1.3358 low on January 27 and has touched its highest point in two weeks, as the dollar remained under bearish control.

Several FOMC members opposed market bets for a 50 bps rate hike in March, which along with the recent decline in the US Treasury bond yields and an upbeat equity market tone, shifted investors’ bias away from the dollar and towards more risky assets and currencies.

Dollar Weak Against Sterling Following Barrage of Unfavorable Factors

The bearish tone around the USD comes following the worse-than-expected ADP report, which revealed that private employment numbers fell by 301,000 in January. Also, strong expectations of a BoE rate hike in its meeting on Thursday, which has turned out to be correct, extended some support to the GBP, further weakening the greenback.

Meanwhile, market participants also believe that the BoE could announce tapering plans on the £895 billion quantitative easing program in the ongoing meeting. Such an announcement should pump fresh volatility around the GBP/USD pair, creating meaningful trading opportunities for speculators.

In the meantime, traders also expect to take cues from the North American session later today, as the market awaits the US ISM Services PMI data. However, the whole focus will shift to the US economic docket tomorrow, which will feature the release of the NFP data.