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Pound Falls Against Strong Dollar, Later Recovers on BoE Rate Decision

February 4, 2021 at 18:54 by Simon Mugo

A mix of British pound notesThe Sterling pound today fell against the much stronger dollar in the first half of the day’s session driven by the predominantly risk-off market sentiment. The GBP/USD currency pair recouped all its losses and turned positive after the Bank of England announced its hawkish interest rate decision.
The GBP/USD currency pair fell to a low of 1.3566 in the mid-London session before reversing course and spiking to a high of 1.3697 following the BoE decision but as slightly off these highs at the time of writing.

The currency pair’s initial decline was fueled by investor fears regarding the upcoming BoE monetary policy decisions as many feared that the bank would consider negative interest rates. However, the BoE’s Monetary Policy Committee voted unanimously in favour of maintaining the interest rates at 0.1% for the foreseeable future. The BoE Governor Andrew Bailey confirmed that the bank was not in a rush to implement negative rates any time soon. BoE Deputy Governor Sam Woods told banks to prepare for the possibility of negative rates in the next six months while saying that zero rates would be easier to implement.

The greenback’s overall strength as tracked by the US Dollar Index, which hit a high of 91.58, capped the cable’s gains. The release of the upbeat US initial jobless claims report, which saw initial claims fall to 779,000 beating analysts’ estimates of 830,000 claims, also slowed down the cable.

The currency pair’s future performance is likely to be affected by tomorrow’s US non-farm payrolls report and UK politics.

The GBP/USD currency pair was trading at 1.3660 at 18:53 GMT having rallied from a low of 1.3566. The GBP/JPY currency pair was trading at 144.10, having risen from a low of 142.84.

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