GBP still low as markets look towards Bank of England rate decision

Despite the absence of significant data releases, the Pound exchange rate dipped lower on Tuesday, ahead of the Bank of England's forthcoming interest rate decision.

GBP/USD has declined by over 0.2% from Tuesday's opening rate.

On Tuesday, the Pound faced difficulty in attracting bids due to the absence of market-moving UK data. Investors likely refrained from making overly aggressive bets, anticipating high-impact data releases later in the week.

As the Bank of England's latest interest rate decision looms just days away, markets remain immersed in speculation regarding the timing of forthcoming UK interest rate cuts.

After witnessing various messages from central bank officials in recent weeks, the movements of the pound are expected to be restrained until the release of Thursday's accompanying forward guidance.

Tuesday's souring market sentiment provided support for the US Dollar, as the absence of any US economic data left the greenback exposed to vulnerabilities.

Nevertheless, owing to its status as a primary safe-haven currency, USD exchange rates received modest support amidst jittery trading conditions.

Anticipating the afternoon, Federal Reserve official Neel Kashkari is scheduled to deliver a speech. If the Fed official addresses monetary policy and expresses hawkish viewpoints, USD exchange rates might see an uptick towards the end of Thursday's European session.

Ahead, the predominant driver influencing the movement of the Pound US Dollar exchange rate this week will undeniably be the Bank of England's imminent interest rate decision.

During this meeting, the central bank is widely anticipated to maintain interest rates at 5.25%, prompting investors to closely scrutinize the BoE's accompanying forward guidance for any hints regarding the future trajectory of monetary policy.

As markets are currently pricing in the first rate cut to occur in September, any dovish stance from BoE policymakers could lead to a reassessment of current market expectations, potentially undermining GBP.

Looking ahead to Friday, the UK's preliminary GDP data for the first quarter of 2024 is anticipated to reveal a 0.4% expansion, contrasting with a 0.3% contraction in the fourth quarter of 2023. If the data aligns with expectations, it is likely to bolster the Pound against its counterparts.

Turning to the US dollar on Thursday, domestic initial jobless claims for the week ending May 4 are predicted to rise, a scenario that could potentially weigh on USD exchange rates if the data aligns with expectations.

Nonetheless, on Friday, Michigan's preliminary consumer sentiment reading for May is forecasted to experience a slight decline, a factor that could potentially lead to the 'greenback' ending the week on a weaker note.

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