The British pound sterling, paired with the US dollar, continues to weaken. The current GBPUSD exchange rate stands at 1.2316.
The pound has found itself under pressure as the US dollar strengthens its position. But there is more stress looming ahead.
The Bank of England meeting will take place today, and the market has become nervous. It is very likely that the interest rate will rise to 5.50% per annum, up from the previous 5.25%. Investors are eagerly awaiting commentary, pondering whether the BoE is prepared to further raise the cost of borrowing or will stop at this point. Opinions are also interesting on how the BoE will cope with such high basis prices.
Simultaneously, the minutes from the previous Bank of England meeting will be published, but the market is not likely to pay much attention to them, given the new data expected.
So far, the Bank of England had few difficulties in managing inflation. Prices could fluctuate, but quickly balanced out thanks to active internal processes. With Brexit, the pandemic and other complications, many natural and well-established relationships have been disrupted. The old approach is no longer effective, and a new one is yet to be found.
Against this background, the pound has come under significant pressure.