GBP/USD: Sterling Seesaws Above $1.34 as Bank of England Keeps Rates Flat at 4.25%

Fret not, fans of the rate cut — the UK central bank might be looking to trim interest rates at its next meet-up in August.

📌 Sterling Seesaws Around $1.34

• The GBPUSD pair was seesawing near the $1.34 mark on Thursday after Bank of England officials cast their vote on interest rates. Following in the footsteps of its US counterpart, the Federal Reserve, the UK central bank maintained its interest rates unchanged at 4.25%. (ECB called, asking where’s everyone?)
• The sterling, usually highly sensitive to rate expectations and rate decisions, didn’t do much zig-zagging. Rather, the movements were contained around a 30-pip deviation from the $1.34 handle, not really throwing anything exciting out there for bargain-hungry traders.
• Why so? The rate hold was widely expected because that’s what the Bank of England communicated way in advance. Six out of nine of the BoE’s committee members voted for a hold. Three wanted a 25-basis-points cut.

🔊 August Cut Getting Priced In Now?

• “Underlying UK GDP growth appears to have remained weak, and the labour market has continued to loosen, leading to clearer signs that a margin of slack has opened up over time,” the British central bank said in a statement.
• What likely solidified officials’ decision to keep rates on hold was May’s inflation data, which came in at a 3.4% increase year on year. The clip met Wall Street’s price growth predictions.
• Still, analysts say that the BoE might be eager to cut next time it meets up in early August. For a few reasons — the economy is slowing down and the looming threat from Trump’s tariffs could make things even worse.

👀 Pound’s Role amid Lower Rates

• So where’s the pound in all that? It’s caught in a limbo. On the one hand, higher interest rates suggest that yields stay higher and that’s strengthening the local currency as it’s able to yield relatively well.
• But on the other hand, lackluster economic growth might put off traders and investors and prompt them to seek better opportunities overseas, instead of jamming their capital in UK markets and the UK currency.
• Still, the pound’s rise this year ain’t too shabby — up 7.5% against the dollar since January trading kicked off. Can it continue the quest for higher grounds even if rates drop? Remains to be seen.