Investing.com – Sterling extended its gains against the dollar and fell against the euro after the Bank of England (BOE) decided to keep its bank rate steady at 4.75%. This move was expected, but it should be noted that three out of nine policy makers were in favor of cutting rates.
The BOE expects a small increase in inflation in the short term, and economic growth at the end of 2024 could be weaker than previously expected. The challenge facing policymakers is to maintain price stability without making monetary policy too tight.
After the decision, the rise rose to 0.8264 from 0.8236, which fell to 1.2593 from 1.2631.
The Federal Reserve delivered a 25 basis point rate cut on Wednesday, but signaled it will slow the pace of cuts. US rates are expected to remain at higher levels for longer, leading to a wider policy divergence with other major central banks.
At the same time, the weakness of the yen increases the possibility of forex intervention. After a meeting with a hawkish Fed, it has risen well above 155 due to a rate hold by the Bank of Japan (BOJ) and an apparent lack of urgency to hike.
Despite the yen being the most valuable currency in the G-10 space, expectations of higher US yields and a hesitant BOJ suggest that the Japanese authorities may struggle with USD/JPY at 160 for its most of 2025.
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