Pound Sterling slumps as BoE Mann votes for holding interest rates steady at 5.25%

• The Pound Sterling drops sharply from 1.2800 after the BoE keeps interest rates unchanged at 5.25%.
•  Eight out of nine BoE’s MPC members have voted for holding interest rates at their current levels.
• The US Dollar rebounds as the Fed painted an upbeat US economic outlook.

The Pound Sterling (GBP) falls sharply in Thursday’s late London session as eight out of nine members led-Monetary Policy Committee (MPC) of the Bank of England (BoE) has voted to keep interest rates unchanged at 5.25% for the fifth time in a row. The BoE was widely expected to announce a steady interest rate decision. However, BoE policymaker Catherine Mann, who has surprisingly voted for keeping interest rates unchanged at 5.25%, has built downside pressure on the Pound Sterling. 

Monetary Policy Committee (MPC) members Catherine Mann and Jonathan Haskel have been voting for a further interest-rate hike in the past four policy meetings even as most of the MPC members decided to keep rates on hold at 5.25%. Haskel was expected to vote for holding interest rates steady. It seems that recent soft inflation figures have changed the views of Catherine Mann. UK’s Consumer Price Index (CPI) price pressures grew slower than market expectations in February. Annual headline and core inflation softened to 3.4% and 4.5%, respectively. The UK Office for National Statistics (ONS) reported that “Food and prices at eateries were the biggest downward drags, offset by motor fuels.” 

On Wednesday, the GBP/USD pair saw a juggernaut rally, prompted by investors’ higher risk appetite as the Federal Reserve (Fed) stuck to the forecast of three rate cuts for this year. This impacted investors’ appeal for the US Dollar (USD). However, it rebounded as the Fed’s upwardly revised Gross Domestic Product (GDP) forecasts for 2024 limited its downside.

Daily digest market movers: Pound Sterling drops as BoE Mann remains neutral on interest rates

• The Pound Sterling falls sharply to 1.2730 as eight out of nine BoE policymakers, including Catherine Mann and Jonathan Haskel, favor keeping interest rates unchanged at 5.25%. BoE policymaker Swati Dhingra has voted for a rate cut as expected.
• The BoE reiterates that rate cuts should be considered only after gaining confidence that inflation will sustainably return to 2%. BoE Governor Andrew Bailey said in the monetary policy statement that we have not reached to a point where we can reduce interest rates but inflation is moving in a right direction.
• Meanwhile, the US Dollar Index (DXY) rebounded from a day-low of 103.17, supported by an improved US economic outlook in the latest economic projections by the Federal Reserve. Over the interest rate outlook, the Fed maintained its projections of three rate cuts for this year in its monetary policy meeting on Wednesday. Fed policymakers didn’t dial down their rate-cut projections despite inflation remaining hotter than expected in February.
• The Fed continued with its argument that rate cuts are appropriate only if it gains greater confidence that inflation will sustainably decline to the 2% target. However, it mentioned that the underlying story of price pressures moving in the right direction has not changed despite the recent acceleration in inflation.

Technical Analysis: Pound Sterling faces pressure near 1.2800

The Pound Sterling struggles to extend its upside above the round-level resistance of 1.2800. The GBP/USD pair delivered a strong recovery after discovering buying interest near the breakout region of the Descending Triangle formed around 1.2700. The near-term demand for the GBP/USD pair turns bullish as it rebounds above the 20-day Exponential Moving Average (EMA), which trades around 1.2740. 

On the downside, the downward-sloping border of the Descending Triangle chart pattern will support the pair. On the upside, a seven-month high at around 1.2900 will be a major barricade for the Cable.

The 14-period Relative Strength Index (RSI) climbs above 60.00. If the RSI (14) manages to sustain above that level, bullish momentum will trigger.