The Bank of England (BoE) maintained its Bank Rate at 3.75% in a 6–3 vote, citing a more challenging inflation backdrop. The Consumer Price Index (CPI) is projected to reach around 3.75% in Q4 and slightly above 4% in early 2027, largely due to higher energy prices. Despite these inflation concerns, the BoE noted limited evidence of material second-round effects in wages and prices. The British Pound (GBP) weakened overnight, even as broader USD/UST yields eased. The most notable market reaction was in gilts, with 30-year yields falling approximately 12 basis points, following the BoE's decision to overhaul its quantitative tightening (QT) program and pause active gilt sales for six months. Market participants have already priced in nearly 100 basis points of further tightening until July 2027, which may cap incremental support for GBP from rate expectations alone. Technical analysis indicates bearish momentum for GBP, with resistance at 1.3420 and support at 1.3310 and 1.3270 levels [1].
Meanwhile, the Reserve Bank of Australia (RBA) kept its policy rate unchanged at 4.35%, following three consecutive increases earlier this year. The Australian Dollar (AUD) strengthened, rising 0.20% to trade around 0.7125, buoyed by hawkish comments from RBA officials. Governor Michele Bullock emphasized that inflation remains 'too high,' with upside risks emerging, particularly due to tensions in the Middle East. Deputy Governor Andrew Hauser echoed a cautious tone, questioning whether the current tightening is sufficient and leaving the door open for further rate hikes. Markets expect another increase to 4.6% at the next meeting, reflecting policymakers' determination to contain inflationary pressures. However, the upside for AUD/USD is limited by the strength of the US Dollar, as the Federal Reserve recently raised its policy rate by 25 basis points to a range of 3.75%-4%, and Fed Chair Kevin Warsh delivered a hawkish message, fueling expectations of another rate hike potentially as soon as December. Technical analysis shows AUD/USD holding a neutral near-term bias, with resistance at 0.7140 and 0.7159, and support at 0.7122 and 0.7075 [2].
Both central banks are navigating persistent inflation risks and have signaled a cautious approach to further tightening. The BoE's pause in active gilt sales and the RBA's hawkish stance have influenced their respective currencies, with GBP weakening and AUD strengthening. Market expectations for additional rate hikes remain high, but the strength of the US Dollar continues to challenge both GBP and AUD advances.
CONCLUSION
The BoE and RBA both held rates steady amid ongoing inflation concerns, with the BoE pausing active gilt sales and the RBA signaling openness to further tightening. GBP weakened while AUD strengthened, but both currencies face headwinds from a strong US Dollar and elevated Fed rate expectations. Market sentiment remains cautious, with inflation risks and central bank policy paths closely watched.