Pound Sterling gives back gains as BoE leave interest rates steady, with 7-3 majority

The Pound Sterling gives up gains against its major peers after the BoE left its borrowing rates steady at 4.25%, as expected/
The BoE left interest rates unchanged with a 7-3 majority vote.
Middle East tensions escalate over the possibility of the US striking Iran.

The Pound Sterling (GBP) faces selling pressure against its major peers on Thursday as the Bank of England’s (BoE) leaves interest rates steady at 4.25%. The BoE was expected to do so as it guided a “gradual and careful” stance to the monetary expansion path in the May policy meeting, following an interest rate reduction by 25 basis points (bps).

Investors expected the BoE to leave borrowing rates steady at 4.25%, with a 7-2 majority. However, three Monetary Policy Committee (MPC) members: Swati Dhingra, Dave Ramsden and Alan Taylor have supported for an interest rate cut. These members stated that loosening labour market, subdued consumer demand, and pay deals near sustainable rates encouraged them to endorse further monetary policy easing.

The BoE expects inflation to peak at 3.7% in September and remain just under 3.5% for rest of year.

Going forward, the next trigger for the Pound Sterling will be the BoE’s interest rate guidance and the potential impact of energy shocks stemming from Middle East tensions on the inflation outlook

Financial market participants expect the BoE to reassess its moderate policy-easing approach after the latest batch of United Kingdom (UK) employment and wage growth data for the three months ending April, and the Consumer Price Index (CPI) data for May.

The UK labor market data showed some cracks in job and wage growth due to an increase in employers’ contributions to social security schemes. Moderate wage growth led to a slowdown in inflation in the services sector, which is closely tracked by BoE officials. The Service inflation cooled down to 4.7% from 5.4%.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.02%	0.05%	0.36%	0.16%	0.74%	0.92%	-0.15%
EUR	-0.02%		0.04%	0.32%	0.09%	0.65%	0.86%	-0.22%
GBP	-0.05%	-0.04%		0.29%	0.05%	0.62%	0.91%	-0.06%
JPY	-0.36%	-0.32%	-0.29%		-0.24%	0.23%	0.47%	-0.45%
CAD	-0.16%	-0.09%	-0.05%	0.24%		0.48%	0.79%	-0.11%
AUD	-0.74%	-0.65%	-0.62%	-0.23%	-0.48%		0.34%	-0.75%
NZD	-0.92%	-0.86%	-0.91%	-0.47%	-0.79%	-0.34%		-1.01%
CHF	0.15%	0.22%	0.06%	0.45%	0.11%	0.75%	1.01%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Daily digest market movers: Pound Sterling underperforms US Dollar

The Pound Sterling skids to near 1.3400 against the US Dollar (USD) during European trading hours on Thursday. The GBP/USD pair edges lower as the US Dollar (USD) gains, while Middle East tensions have increased demand for safe-haven assets. Another reason behind the strength in the US Dollar is the downward revision in the forecasts for interest rate cuts by the Federal Reserve (Fed) in 2026 and 2027.
Tensions surrounding the war between Israel and Iran have escalated as Washington assembles military equipment in the Middle East to strike Tehran. According to a report from Bloomberg, senior US officials are preparing for the possibility of attacking Iran in the coming days. Market experts believe that the US involvement in bombardments on Iran would accelerate geopolitical tensions, a scenario that could further strengthen demand for safe-haven assets.
Earlier this week, the US also mobilized some defence equipment to the Middle East. However, Washington clarified that the military activity aims to protect its bases located in the region. “We are postured defensively in the region to be strong, in pursuit of a peace deal,” US Defense Secretary Pete Hegseth said in an interview with Fox News.
On the economic data front, the Fed held its key borrowing rates steady in the range of 4.25%-4.50% for the fourth straight meeting and retained guidance of two interest rate cuts this year. However, the Fed revised the interest rate target for 2026 to 3.6%, from 3.4% projected in March, suggesting that the central bank sees inflation expectations de-anchoring. For 2027, the Fed sees interest rates sliding to 3.4%, revised higher from the prior anticipation of 3.1%.
Fed Chair Jerome Powell has warned of stagflation risks, citing that “effects of tariffs will depend on level, and increases this year will likely weigh on economic activity and push up inflation”.

Technical Analysis: Pound Sterling sees downside to near 1.3250

The Pound Sterling extends its losing spree for the third trading day on Thursday against the US Dollar, sliding to near 1.3400. The near-term trend of the GBP/USD pair has turned bearish as it has declined below the 20-day Exponential Moving Average (EMA), which is currently trading around 1.3480.

The 14-day Relative Strength Index (RSI) drops to near 40.00, where it is likely to find support. A fresh bearish momentum would emerge if the RSI slides below that level.

Looking down, the May 16 low around 1.3250 will act as a key support zone. On the upside, the three-year high around 1.3630 will act as a key barrier.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.