The British pound strengthened against the US dollar on Thursday, with GBP/USD pushing higher toward the 1.31 level. The recovery followed a period of extended bearish pressure and was bolstered by a surprisingly narrow Bank of England (BoE) vote on interest rates, fueling hopes that policymakers may soon pivot to support the UK’s slowing economy despite persistent inflation.
As expected, the BoE’s Monetary Policy Committee (MPC) voted to keep interest rates unchanged this week. However, the five-to-four split among committee members caught investors’ attention, revealing growing internal support for a potential rate cut. The closer-than-anticipated vote suggested that some policymakers may be prioritizing economic growth over inflation control in upcoming meetings.
While the UK’s inflation rate has remained stubbornly elevated at around 3.8% since July nearly double the upper limit of the BoE’s target range weak economic momentum and sluggish business activity are increasingly pressuring the central bank to adopt a more accommodative stance. The tighter MPC vote has therefore been interpreted as an early signal that rate reductions could be on the horizon if inflation continues to cool in the coming months.
In the US, the prolonged government shutdown the longest on record has disrupted the release of key economic data, including Friday’s highly anticipated Nonfarm Payrolls (NFP) report. With official datasets temporarily halted, investors have turned their focus to private-sector indicators, which tend to show higher volatility. The University of Michigan’s Consumer Sentiment and inflation expectations surveys, still scheduled for release on Friday, are likely to attract increased attention as traders seek alternative insights into US economic conditions.
Overall, the pound’s rebound reflects a combination of technical correction and shifting rate expectations, while uncertainty surrounding US data flow continues to weigh on the greenback.
