Sterling erases Wednesday’s gains on BoE’s dovish pivot

The BoE kept the Bank Rate at 5.25%, with a split vote of 8-1, with no officials expecting a rate hike, and one dissenter that voted for a rate cut. At the previous meeting, policymakers voted 6-3, with two members expecting a rate hike. Given the stance adjustment amongst policymakers, there’s growing consensus on the BoE that the current level of rates is tempering inflationary pressures.

The latest inflation reports in the UK witnessed inflation dipping from 4% to 3.4%. Following the BoE’s decision, money markets are pricing a 75% chance of a rate cut in June, up from 65% earlier in the day.

The Greenback recovered some lost ground following Wednesday's Federal Open Market Committee (FOMC) policy decision. The FOMC kept rates unchanged and didn’t revise its rate cut expectations for 2024 despite printing back-to-back high inflation reports in the US. Regarding those reports, Federal Reserve (Fed) Chair Jerome Powell stated the road to lowering inflation to the Fed’s 2% goal would be bumpy.

The US economic docket revealed that unemployment claims for the last week dipped from 212K to 210K, lower than the 215K estimated. Other data witnessed S&P Global Flash PMI final readings for March mixed, though manufacturing activity improved. Elsewhere, Existing Home Sales jumped from 4 million to 4.38 million, an increase of 9.5%