The British pound (GBP) faced a sharp pullback against the US dollar (USD) on Thursday, dipping below the 1.2400 mark after encountering resistance at key moving averages. The Bank of England (BoE) reduced interest rates by 25 basis points, but adopted a hawkish stance in its statement, leading markets to scale back expectations for further rate cuts in 2025.
Market forecasts suggest the BoE may implement one or two additional rate reductions this year. The decision to cut rates was unanimous among the nine members of the Monetary Policy Committee (MPC), with seven members supporting a 25 bps cut, and two advocating for a more aggressive 50 bps reduction. Despite this dovish stance, markets are now pricing in only around 70 more basis points in cuts for 2025.
Attention now shifts to the US labor market, with Friday’s Nonfarm Payrolls (NFP) report expected to show a slowdown in job growth, forecast at 170,000 for January, down from December’s 256,000. Additionally, analysts will closely monitor any revisions to previous data, as 2024’s trend favored stronger-than-expected figures, which hindered hopes for softer US employment data that could prompt the Federal Reserve to ease its rate hikes.
GBP/USD Price Outlook
GBP/USD saw a technical rejection at the 50-day Exponential Moving Average (EMA) on Thursday, briefly falling to 1.2350 before recovering slightly to settle just below 1.2450. As the bullish momentum weakens, further downside movement is possible unless the pair can regain support above key levels.
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