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The Bank of England raised UK interest rates by 0.5% today to 5%, the highest level in 15 years. The committee voted by 7-2, with two committee members voting to keep interest rates at 4.5%.
Market expectations were for a 25bps rate hike, though this was less certain following a surprisingly high inflation read for the UK on Wednesday morning.
The GBP/USD initially spiked on the news but quickly retreated as the generally sour mood in the markets provided support for the USD. Investors are also concerned about the impact of higher inflation rates on the UK economy in the coming months. With the BoE seemingly unable to control inflationary pressure with the same efficacy as its European and American counterparts, the risk of the UK falling into recession is becoming increasingly likely.
Volatility in the GBP/USD pair is likely to continue as traders look to a second day of testimony from Jay Powell, Chairman of the US Federal Reserve Bank. Minor pairs involving the GBP also saw huge volatility, with the EUR/GBP hitting a 3-week high and the GBP/JPY spiking as traders took advantage of Japan’s dovish monetary policy.
Analyst expectations are for the GBP/USD to recover once the volatility dies down, though further hawkish rhetoric from Jay Powell may derail any GBP bullish sentiment.
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Head of Content
Head of Content at FxScouts since 2019, Chris Cammack ensures all content meets our high standards of quality and clarity, shaping editorial guidelines and overseeing broker reviews. Chris brought 10 years of experience in research, editorial, and design for political and financial publications, and has a deep knowledge of international financial markets and geo-politics. He co-hosts the "Let's Talk Forex" podcast with Alison and writes for the news section on a regular basis.
Senior Financial Writer
Alison joined the team as a writer in 2021. She is the Senior Financial Writer for FxScouts. She has a medical degree with a focus on physiotherapy and a bachelor's in psychology. However, her interest in forex trading and her love for writing led her to switch careers. She has a passion for Forex trading and over a decade of editorial experience researching Forex and the financial services industry, producing high-quality content. She hosts a weekly podcast, "Let's Talk Forex", alongside Chris and has produced over 100 Forex educational videos for the FxScouts YouTube channel. She also writes weekly technical analyses and has tested and reviewed over 100 Forex brokers.
Financial Writer
Ida is a financial writer with a degree in Digital Marketing and a strong background in content writing and SEO. Her expertise extends beyond marketing and writing, with a keen interest in cryptocurrencies and blockchain networks. Ida's passion for crypto trading sparked a deeper fascination with Forex technical analysis and price movement. She is continually expanding her knowledge in Forex trading, staying informed about the latest trends and identifying the best trading environments for new traders.
Financial Writer
