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Sterling Tumbles as Bank of England Surprises Traders

British pound falls across the forex market as the Bank of England surprises traders and backs away from an interest rate rise.

SageFX - Nov, 05, 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

  • British sterling drops 1.5% against the USD and almost 2% against the JPY
  • The Bank of England surprises traders as it backs away from an immediate interest rate rise

What’s Moving in the Markets?

The British sterling fell in the forex market Thursday as the Bank of England diverged from the expected course of action. In a press conference, Bank of England Governor Andrew Bailey confounded pound traders as he kept interest rate unchanged.

Prior to the central bank’s decision, market participants were convinced BoE officials will raise the rate to tackle inflation. This said, persistent higher prices have dented the economic outlook for the UK as inflation is expected to reach 5%.

As a result of the surprising move, the British pound dropped 1.5% to trade below 1.3500 against the US dollar. The level is the lowest GBP/USD has reached over the last five weeks. As the drop in the sterling was broad-based, the GBP/JPY tumbled 2% to float near 153.10.

With this in mind, Friday’s forex trading would be focused on digesting the GBP developments. To this end, traders could take advantage of the volatility in sterling pairs.

What’s the Big Picture for Traders?

Meanwhile, in the wider financial markets, crypto assets and stocks hover fairly flat early Friday.

On the one hand, the cryptocurrency market is looking healthy and stable, with bitcoin trading above $62,000. On track to end the week in the green, the orange coin has advanced moderately by 1% since Monday.

The leading crypto received a boost after incoming New York City Mayor Eric Adams said he wants to take Bitcoin as payment. “I’m going to take my first THREE paychecks in Bitcoin,” Mr. Adams said on Twitter. “NYC is going to be the center of the cryptocurrency industry and other fast-growing, innovative industries! Just wait!”

Ethereum, in the meantime, is up over 6% this week. Moreover, the second-biggest coin set a new all-time high of $4,665 on Tuesday.

And on the other hand, Wall Street stocks notched their sixth consecutive record close on Thursday. In more detail, the S&P500 pushed to a record high of 4,680.06 after gaining 0.4% on the day. Also, the tech-heavy Nasdaq Composite added 0.8% to reach a fresh peak of 15,940.31.

The recent rally has been fueled by positive remarks from Fed Chair Powell made on Wednesday. In his speech, he said the US economy has progressed enough for the central bank to start unwinding its monetary support.

The price of gold moved higher on Thursday and early Friday. The precious metal added over 1.5% for the period to cross $1,800 per troy ounce.

What to Watch in the Markets?

Today, traders and investors shift their focus to the latest US jobs report. In other words, the nonfarm payrolls for the month of October will show the pace of economic recovery.

On this note, analysts expect that US employers have added 450,000 new jobs to the labor market. In comparison, the number of new hires for September landed at 194,000.

Economic Data Coming Up Today (EST times)

The nonfarm payrolls report will be released by the US Labor Department at 08:30 am. At the same time, the unemployment rate will be announced. Also, Canada will publish its employment change for October.

 

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