Ella 
The pound extended losses against the dollar after the Bank of England announced a 25 basis point interest rate cut at its August rate meeting on Thursday. GBP/USD was trading around 1.2720 during the Asian session on Friday.
Bank of England Governor Andrew Bailey explained the decision to cut the policy rate to 5% and answered questions from the media. Bailey noted that from their perspective, raising the minimum wage has no negative impact. Bailey said that while companies often say that raising the minimum wage has compressed wages, the overall inflation trajectory, including upside risks, is now closer to the 2% target than the median forecast.
The U.S. dollar is likely to move higher against major currency pairs as risk aversion intensifies. The latest manufacturing and labor market data have created a complex picture involving a slowdown in the U.S. economy and increasing expectations that the Federal Reserve will cut interest rates. If the economic downturn is too severe, it may have a negative impact on market sentiment and make the Fed’s interest rate cuts meaningless.
The U.S. ISM Manufacturing Purchasing Managers’ Index (PMI) fell to 46.8 in July, hitting an eight-month low. The previous value was 48.5 and expected 48.8. U.S. initial jobless claims rose to 249,000 in the week ended July 26 from 235,000 the previous week, beating expectations of 236,000.
CME Group’s FedWatch tool shows traders fully expect the Fed to cut interest rates by 25 basis points on September 18. Traders are likely to keep a close eye on U.S. July non-farm payrolls and average hourly earnings due late in the U.S. session to get a sense of the state of the U.S. labor market.
