GBP/USD: BoE has tough act to follow after Fed cuts rates

• GBP/USD briefly touched 11-week highs before a sharp drag back into the low side.
• The Fed delivered a broadly-expected interest rate cut on Wednesday, but policy tone remains apprehensive.
• The BoE now has to follow up its larger cousin with what is expected to be a more measured rate approach.

GBP/USD surged into its highest bids in eleven weeks on Wednesday, bolstered by a spat of broad-market Greenback weakness after the Federal Reserve (Fed) delivered its first interest rate cut of the year, and the dot plot shifted lower to incorporate more rate cuts in the future than the previous Fed meeting.

The Fed's Summary of Economic Projections (SEP)indicated that Fed policymakers foresee more rate adjustments in the near future. The dot plot suggests that most policymakers anticipate interest rates will reach about 3.5-3.75% by the end of the year, with the possibility of two more rate cuts through December.

However, a cautionary appearance from Fed Chair Jerome Powell sharply reversed risk flows after he reminded markets that Fed rate cuts aren't on a predetermined path, and can only continue if the economic data supports it.

The Bank of England (BoE) is set to deliver its own interest rate decision on Thursday. The BoE has big shoes to fill after the Fed took center stage this week, and the BoE's Monetary Policy Committee (MPC) is widely expected to vote 7-to-2 in favor of keeping rates on hold for the time being.

GBP/USD daily chart