Where we are: GBP/USD is currently hovering around 1.3610, consolidating gains made overnight. The pair traded in a tight range between 1.3580 and 1.3625 during the Asian and early European sessions. This level sits just above yesterday’s New York close, suggesting the pound is holding its ground despite a relatively quiet overnight session.
What’s driving it: The Bank of England’s cautious stance and recent economic data are keeping Sterling supported. The MPC’s 8-1 vote to hold rates at 4.50% at the March meeting highlights their data-dependent approach, with concerns over persistent services CPI (near 5%) and wage pressures. The vote split reveals a dovish undercurrent (Dhingra dissenting for a cut), but the majority remains hesitant to signal an easing cycle. Recent UK CPI data showed a slight increase to 3.3%, further reinforcing the BoE’s wait-and-see approach. While the pound climbed in early May to its highest level since mid-February, this was influenced by both the BoE’s policy decision and a fresh surge in oil prices.
- The Bank of England’s Monetary Policy Committee voted 8-1 to maintain Bank Rate at 4.50%, signalling data-dependent caution.
- UK CPI rose to 3.3%, supporting the BoE’s reluctance to cut rates.
- CFTC data shows moderately short GBP positioning, with net non-commercial contracts at -52,039, suggesting potential for a squeeze.
NY session focus: All eyes now turn to the 10:00 ET release of the ISM Manufacturing PMI and ISM Manufacturing Prices data out of the US. A stronger-than-expected print could boost the USD and weigh on GBP/USD, testing support around 1.3550. Conversely, a weaker reading could see Cable pushing towards 1.3650 and potentially testing the 1.37 level. The trade that’s working right now is fading intraday dips in Cable, betting on continued BoE hawkishness. The trade that’s at risk is shorting Sterling against the Euro, given the ECB’s own reluctance to ease policy. The pain trade for GBP/USD would be a significant dovish repricing of BoE expectations if UK data softens considerably in the coming weeks.