GBP/USD: Sterling Rallies Above $1.34 on Bank of England’s Fifth Rate Cut in a Year

UK currency added 0.5% shortly after the central bank axed rates once again. But shouldn’t it be going lower when rates go lower? Not if the rate cut almost didn’t pass.

💷 Pound Pops Despite Rate Cut

• The GBPUSD pair jumped 0.5% to $1.3430 Thursday, extending last week’s gains and snapping back from a summer slump with the fifth straight day of increases.
• The reason? An odd one — a rate cut by the Bank of England. Traders brushed off a 25-basis-point cut, which means the pound will yield less, and focused instead on just how divided the BoE was on making it.
• The decision (the fifth rate cut in the past 12 months) nearly didn’t happen, with a tight 5–4 vote on the Monetary Policy Committee. Hence the sharp upside swing in the UK currency.

✂️ Split Decision Amid Sticky Inflation

• The takeaway? Fewer cuts ahead might be the new message, especially if inflation continues to run hotter than expected. Policymakers lowered rates to 4% in what they called a “gradual and careful” easing path — central bank speak for we’re still watching the CPI like hawks.
• Inflation ticked up to 3.6% in June, well above the 2% target and hotter than the prior 3.4%. Not exactly a green light for doves.
• Meanwhile, the UK economy is slowing and the jobs market is cooling, so the BoE is walking a tightrope: support growth without letting inflation reheat.

🕊️ Rate Path Now Looks Less Dovish

• The narrow vote margin means growing internal resistance to more cuts. Several MPC members likely fear a rebound in price pressures.
• As a result, market bets on aggressive easing have faded, with traders now expecting a more cautious pace for the rest of the year.
• “Guys, that’s it for the pound, most likely — buy up,” forex traders, probably. Sterling is getting a sentiment lift as expectations recalibrate — not because rates are high, but because they might not go much lower.