British Pound loses its footing as BoE hold meets Fed hike

The British Pound (GBP) experienced a decline on Thursday as the Bank of England (BoE) decided to keep interest rates unchanged in a 6-3 vote. This decision, along with the Federal Reserve's (Fed) rate increase on Wednesday, weakened the GBP/USD pair, which fell to 1.3381, marking a loss of over 0.23%. The BoE maintained the Bank Rate at 3.75%, with three dissenters advocating for a 25-basis-point hike.

The Bank also planned to reduce UK bond purchases and conduct up to £20 billion in annual Gilt sales. The BoE expressed readiness to act to bring inflation to its target, highlighted upside inflation risks, and acknowledged that monetary policy would depend on the extent of the energy shock. Following the BoE's decision, markets priced a 64% likelihood of a rate hike during the November 5 meeting.

Investors now closely monitor UK August Retail Sales, forecast to improve after a -0.5% month-over-month contraction in July. Meanwhile, the Federal Reserve raised interest rates for the first time in three years, to 3.75%-4%, deeming the US economy strong and the labor market robust. Officials anticipate another rate hike by year-end, with the Fed funds rate nearing the 4% threshold.

Additionally, the US economic data showed a sharp decrease in jobless claims for the week ending September 12, falling to 196K, significantly below the 208K forecast.