GBP/USD: Sterling Tumbles 2% to $1.2580 After Bank of England Keeps Rates Steady

US dollar blew past rivals Thursday, a day after the Fed maintained interest rates unchanged and reaffirmed guidance for three rate cuts.

Key Points:

• Bank of England keeps rates steady.
• UK sterling drops on rate-cut outlook.
• GBPUSD slips to $1.2580.
• The GBPUSD pair nosedived on Thursday and early Friday after the Bank of England held UK interest rates steady at 5.25%. The UK central bank followed up by saying it planned to start cutting borrowing costs but needed more data before dialing back the benchmark rate from its 16-year high. A day earlier, the US Federal Reserve telegraphed a similar message saying three rate cuts are planned for 2024.
• The sterling didn’t take the news well and slipped more than 220 pips, or roughly 2%, to $1.2580 early Friday, down from $1.2800 a day before. Zoomed out, however, the UK currency is putting on an impressive performance with its valuation up about 5% against the dollar since October.
• Governor Andrew Bailey praised the progress and noted that the economy is “moving in the right direction” as far as inflation is concerned. For February, Britain’s consumer price index showed inflation moved 3.4% from a year ago, sliding below estimates for a 3.6% rise.