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GBP/USD gained momentum and traded higher to 1.2730, up 0.17% on the day.
The Bank of England raised interest rates by 25 basis points (bps) from 5% to 5.25% in its August resolution.
Market participants will focus on U.S. non-farm payrolls data due later in the day.
In the early Asian market on Friday, the GBP/USD trend was positive, ending a four-day losing streak. GBP/USD is currently trading at 1.2730, up 0.17% on the day.
The Bank of England (BOE) raised interest rates by 25 basis points (bps) from 5% to 5.25% at its August rate decision meeting on Thursday, a 15-year high. Markets expect the Bank of England to raise interest rates two more times before the end of the year due to stubbornly high inflation in the UK. That said, the UK consumer price index (CPI) came in at 7.9% in June, almost four times the Bank of England’s 2% target and more than double US inflation.
Bank of England Governor Andrew Bailey said in his policy outlook that the central bank expects inflation to fall to around 5% in October. Bailey added that the future path of interest rates is not assumed.
In terms of the dollar, data released by the U.S. Department of Labor on Thursday showed that the number of initial jobless claims in the U.S. rose to 227,000 in the week ended July 29, in line with expectations. The U.S. ISM Services PMI fell to 52.7 in July from 53.9 previously, below expectations for 53. Finally, unit labor costs came in at 1.6% in the second quarter, below expectations for 2.6%.
Last week, the Federal Reserve decided to raise interest rates by 25 basis points in the July rate decision. However, unlike the BoE, the market believes the Fed is nearing the end of its tightening cycle.
Market participants will be closely watching U.S. non-farm payrolls data due later in the day. This event could provide hints for a clear direction for GBP/USD. In addition, the unemployment rate and average hourly earnings will be released on Friday. In the absence of major economic data from the UK, investors will digest the Bank of England meeting statement, and dollar volatility will be the main driver of GBP/USD.
