MUFG says the Bank of England’s hawkish hold should keep Sterling supported, but Governor Bailey’s pushback against imminent rate increases limits the scope for a sustained GBP/USD rally.
The Pound to Dollar exchange rate (GBP/USD) ended July around 1.3482 after gaining 1.75% over the month and rebounding strongly from lows below 1.33.
GBP/USD rose around 0.85% over the final 48 hours of July, reaching a high near 1.3495 and finishing close to the top of that range.
Over the past three months, the pair has traded between approximately 1.3142 and 1.3658, leaving the latest rate near the middle of its broader spring and summer range.
MUFG believes the Bank of England’s latest communication remains supportive for Sterling, although policymakers stopped short of signalling an imminent rate increase.
The Monetary Policy Committee left rates unchanged, with MUFG’s textual analysis describing the written contributions as consistent with a hawkish hold. Policymakers continued to emphasise inflation persistence, second-round effects and the risks posed by energy prices and geopolitical uncertainty.
The committee remains divided. MUFG’s framework placed Catherine Mann firmly in hawkish territory, followed by Huw Pill and Megan Greene, while Swati Dhingra and Alan Taylor remained on the dovish wing.
Mann’s shift was particularly notable, with her comments placing greater weight on inflation risks arising from Middle East tensions and volatile energy prices.
The press conference delivered a more balanced signal than the written statement, however.
MUFG scored the MPC contributions at 23.3 on its hawk-dove scale, compared with a softer 17.0 for Governor Andrew Bailey’s press conference.
Bailey explicitly warned markets not to leave the meeting believing that the MPC was “edging towards a hike”.
That distinction is important for Pound Sterling.
The BoE remains concerned enough about inflation to resist a dovish shift, supporting UK yields and the Pound, but it is not yet preparing investors for another tightening move.
According to MUFG, “the communication remains supportive, but the deliberate pushback against rate hike expectations limits the scope for upside.”
The Pound-Dollar exchange rate charts reinforce that mixed picture.
GBP/USD has recovered above both its short-term moving averages, but remains below the May high near 1.3658.
A clean move through 1.3500 would improve the immediate technical tone, while the 1.3550-1.3660 area is likely to offer stronger resistance.
Pound Sterling’s rebound can therefore extend while the Dollar remains under pressure, but MUFG’s assessment suggests the BoE alone is unlikely to drive GBP/USD decisively beyond its recent highs.
Our currency coverage draws on live market data, official economic releases and published bank research.
