British pound gets lift from Fed and BoE pauses

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<li>British pound posts sharp gains</li>
<li>BoE and Fed pause for second straight time</li>
</ul>
<p>The British pound has posted strong gains on Thursday. In the European session, GBP/USD is trading at 1.2216, up 0.54%.</p>
<p><strong>Bank of England pauses</strong></p>
<p>The Bank of England voted to maintain interest rates at 5.25% at today&#8217;s meeting. The pauses follow 14 straight rate increases in the current tightening cycle which began in December 2021. The move indicates that the MPC is sticking to the &#8220;Table Mountain&#8221; approach, which is essentially a &#8220;higher for longer&#8221; stance that keeps rates at elevated levels until the BoE is confident that inflation will fall back to the 2% target.</p>
<p>The MPC vote was 6-3, with the majority favoring a pause and three members voting to hike rates by a quarter-point. At the September meeting, the vote to pause was 5-4. The division within the MPC indicates that members remain divided over policy, which will make it difficult for Governor Bailey to present a clear path moving forward.</p>
<p>The BoE revised inflation projections slightly higher and the statement noted that the BoE stood ready to raise rates if it sees &#8220;more persistent inflationary pressures&#8221;. The markets are hoping that the back-to-back pauses mark the end of the current rate-tightening cycle, but rate cuts aren&#8217;t expected until late in 2024. Governor Bailey said after the meeting that higher interest rates had pushed inflation lower but it was &#8220;much too early to be thinking about rate cuts.&#8221;</p>
<p><strong>US dollar dips after Fed pause</strong></p>
<p>The Federal Reserve held rates for a second straight time on Wednesday. The Fed reiterated that rate hikes remained on the table, but acknowledged that &#8220;tighter financial and credit conditions&#8221; were weighing on inflation. This was likely a reference to the recent rise in US Treasuries, which has increased borrowing costs and could push inflation lower without the Fed having to raise rates.</p>
<p>If Powell was trying to sound hawkish, the markets weren&#8217;t buying it. Future markets have priced in another pause in December and expectations are that the Fed is done with hiking, despite Powell&#8217;s assertion to the contrary. The US dollar is down against all of the majors and US stock markets were strongly higher on Wednesday.</p>
<p>.</p>
<p><strong>GBP/USD Technical</strong></p>
<ul>
<li>GBP/USD is testing resistance at 1.2175. Above, there is resistance at 1.2251</li>
<li>There is support at 1.2068 and 1.2032</li>
</ul>
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