EditorEditor: Alison HeyerdahlUpdated: June 22, 2023
AuthorAuthor: Chris Cammack

Last Updated On June 22, 2023

Chris Cammack

The Bank of England raised UK interest rates by 0.5% today to 5%, the highest level in 15 years. The committee voted by 7-2, with two committee members voting to keep interest rates at 4.5%.

Market expectations were for a 25bps rate hike, though this was less certain following a surprisingly high inflation read for the UK on Wednesday morning.

The GBP/USD initially spiked on the news but quickly retreated as the generally sour mood in the markets provided support for the USD. Investors are also concerned about the impact of higher inflation rates on the UK economy in the coming months. With the BoE seemingly unable to control inflationary pressure with the same efficacy as its European and American counterparts, the risk of the UK falling into recession is becoming increasingly likely.


Volatility in the GBP/USD pair is likely to continue as traders look to a second day of testimony from Jay Powell, Chairman of the US Federal Reserve Bank. Minor pairs involving the GBP also saw huge volatility, with the EUR/GBP hitting a 3-week high and the GBP/JPY spiking as traders took advantage of Japan’s dovish monetary policy.

Analyst expectations are for the GBP/USD to recover once the volatility dies down, though further hawkish rhetoric from Jay Powell may derail any GBP bullish sentiment.

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