The Pound is busy consolidating. Overview for 05.08.2022

GBPUSD priced in the decisions of the Bank of England, but barely moved anywhere.

The Pound Sterling is balancing against the USD after the August meeting of the British regulator. The current quote for the instrument is 1.2164.

The Bank of England had another meeting yesterday and raised the benchmark interest rate to 1.75% (+50 basis points); it’s been the sixth straight rate hike. The key reason why the regulator continues to tighten its monetary policy is surging inflation. The labour market remains tense, while the CPI is increasing.

The British regulator is expecting the national economy to fall into a recession as early as the fourth quarter of 2022. 

At the same time, the BoE doesn’t decline liabilities in regulating the inflation situation. The CPI target remains at 2% and the regulator will go the extra mile to reach it. 

Market rumours have it that the actual interest rate value has no pronounced effect so far: stimulus programmes are over, but the economy is struggling. In this light, the regulator is expected to continue raising the rate by an average of 100 basis points until 2023. 

In the comments, the Bank of England said that it had no targets for exchange rates due to their influence on inflation. 

Overall, the meeting didn’t offer investors anything they didn’t know or expect: the rate will continue rising because the BoE doesn’t have any other options to fight inflation. This could have been good news for the Pound if it wasn't for global pressure from the “greenback”.