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GBP/USD Exchange Rate: BoE Interest Rate Decision in Focus

GBP/USD Exchange Rate Climbs ahead of BoE Decision

The Pound US Dollar (GBP/USD) exchange rate has been gaining ground this morning, ahead of the Bank of England’s (BoE) interest rate decision.

Pound (GBP) to Soar on BoE Tapering Plans?

The Pound (GBP) climbed in the run up to the BoE’s interest rate decision, as GBP investors hoped for some more detailed forward guidance from the central bank.

Though the bank is likely to keep interest rates unchanged, it might take a step closer to tightening monetary policy. Recent hawkish comments from BoE policymakers have some traders expecting the BoE to unveil plans on when it might begin to taper bond purchases.

If such plans are published, the GBP/USD exchange rate could soar.

June’s inflation rate reading spiked to 2.5%, while the country’s economy seems to be rebounding strongly from the pandemic. In addition, Covid cases and hospitalisations have been falling in recent weeks. All of this paints a positive picture of the UK’s future. But is it enough to prompt the BoE to action?

US Dollar (USD) to Gain on Non-Farm Payroll Data?

Meanwhile, the US Dollar (USD) has been softening today as a slight improvement in market mood dampens demand for the safe-haven currency.

USD investors will be eyeing the initial jobless claims data later this afternoon. Unemployment benefits claims are expected to have dropped last week to a one-month low of 384,000.

However, the forecast figure is still well above pre-pandemic levels and would represent a notably smaller decrease than in previous months.

As such, the US Dollar may not find much support for the rest of the afternoon.

Tomorrow, however, could be different. The non-farm payrolls report is expected to show that the American economy added 870,000 jobs in July. If predictions are correct, this would be the strongest job growth in eleven months and the seventh consecutive month of expansion.

However, after the ADP employment change massively missed forecasts yesterday – coming in at 330,000 rather than the forecast 695,000 – there may be concerns that July’s payroll figures may also fall short of expectations.

If the payroll figures print as predicted, USD could get a boost; if they disappoint, then the ‘Greenback’ may face some headwinds.