GBP/USD: Sterling Plummets to 8-Month Low as Bank of England Keeps Interest Rates Flat

Split BoE voters signaled a divided committee with three members in favor of a cut. Economists had expected just one.

• The GBPUSD pair was in freefall mode Friday morning after the Bank of England voted on Thursday to keep rates flat. The decision was met with some resistance from the central bank’s voters and that surprised sterling traders, who rushed to sell. Three members of the Monetary Policy Committee voted to cut rates, while six were in favor of a hold. Analysts were expecting only one voter to break away from the pack.
• With a divided committee, the sterling was exposed to selling pressure, bringing its rate to the dollar to an 8-month low. The pound-dollar pair touched a session low of $1.2470 early Friday and is on track to log the third straight losing session to a total three-day decline of roughly 1.8%. Even before the sterling fell on its own, the dollar knocked its valuation after the Federal Reserve cut rates and laid out its market-shaking guidance a day earlier.
• The pound-dollar pair has had quite the rollercoaster ride this year. After rising more than 700 pips, or over 5.6%, to a 2024 high of $1.3430 in September, the sterling all but erased its annual advance and is now staring at a year-to-date loss of nearly 2%. Contracting economic growth and inflation pressures in the UK paired with broad dollar strength are behind the UK currency’s poor performance in the final quarter of the year.