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Sterling Jumps 1% Against the Dollar as BoE Hikes Interest Rates

The British sterling rose 1% against the US dollar as the Bank of England surprisingly raised key interest rates to 0.25%.

SageFX - Dec, 17, 21

*Sage FX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Principal Points

  • GBP/USD gains over 1% on Thursday to hit 1.3375 as traders increase demand for pounds
  • The Bank of England moves to raise interest rates from 0.1% to 0.25% amid surging inflation

What’s Moving in the Markets?

The British sterling endured heavy volatility on Thursday when the Bank of England surprisingly raised key interest rates. The GBP/USD gained more than 1% to reach a session high of 1.3375 moments after the UK central bank raised rates from 0.1% to 0.25%.

This was the bank’s first interest rate increase in over three years and was needed to counteract the risks of surging inflation. Also, the country is now facing its worst Covid-19 wave as Omicron is sweeping across the nation.

“We’ve seen evidence of a very tight labour market and we’re seeing more persistent inflation pressures,” said Andrew Bailey, Bank of England Governor. “We’re concerned about inflation in the medium term. And we’re seeing things now that can threaten that. So that’s why we have to act.”

On the coronavirus front, UK hospitals are under pressure as the Omicron variant is putting a strain on the country’s health system. To this end, confirmed cases in the UK reached a record high of over 88,000 on Thursday. The number was higher from the previous day record of about 70,000.

What’s the Big Picture for Traders?

Global financial markets, in the meantime, are trading fairly muted early Friday. In more detail, European bourses today are pointing slightly in the red, with the Europe-wide Stoxx 600 down about 0.5%. Also, futures on the major US indexes shifted to negative territory after stocks posted steep losses on Thursday.

This said, the tech-heavy Nasdaq Composite logged a decline of 2.5% yesterday as tech stocks led the drop. In addition, the S&P500 and the Dow Jones Industrial Average dropped 0.9%, and 0.1%, respectively.

Still, some green arrows could be found in the price of gold. Following the Fed’s final press conference of 2021, gold prices have been on the move. More precisely, the precious metal has gained about 3% since Wednesday. Currently, gold is trading near $1,807 per troy ounce.

Despite the strong tailwinds in the price of gold, the yellow metal is showing a loss of about 5% for the year. Silver, on the other hand, is now trading near $22.60, down by 15% since January.

What to Watch in Crypto Markets?

In cryptocurrency trading, the price of bitcoin is floating near $48,000 as US traders shift into gear for the day. With this in mind, the leading cryptocurrency is so far showing a loss of 5% this week. Ether, on the other hand, slipped below $3,900 today and is now down roughly 6% since Monday.

Nevertheless, crypto market traders and investors remain confident the upside swing in prices will accelerate in 2022. So far in the year, bitcoin is higher by about 60%, while Ether is up a staggering 400% since January.

In that context, mainstream adoption is expected to continue driving the market forward as we progress toward the new year.


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