The GBP/USD surges during the North American session, though trading below an eight-day high reached at 1.3436 after the Bank of England (BoE) decided to cut interest rates on a close vote split, signaling that policymakers remained worried about inflation. Also, a jump in unemployment claims in the United States (US) keeps the Dollar pressured. The pair trades at 1.3410, up 0.48%.

Earlier, the BoE cut rates on a 5-4 vote split to 4%, as four members of the BoE's Monetary Policy Committee (MPC) voted to hold rates unchanged, while Taylor wanted a 50-bps rate cut. In its monetary policy statement, the BoE revealed that "a gradual and careful approach" to further cuts on the Bank Rate, but added that "The restrictiveness of monetary policy had fallen as Bank Rate had been reduced."

BoE's decision exerts pressure on Chancellor Rachel Reeves, who is expected to hike taxes in a budget statement toward the end of 2025, to meet her targets for fixing public finances.

In what was perceived as a "hawkish cut," the GBP/USD surged past the 1.3400 figure and hit a weekly peak of 1.3436, before retreating somewhat to the 1.34 figure.

Across the pond, Initial Jobless Claims for the week ending August 2, rose by 228K above estimates of 221K and the prior print of 218K. However, what grabbed economists' attention was that Continuing Claims rose to 1.97 million in the week ended July 26, hitting its highest level since November 2021.

Although the data was negative, money market futures data show that traders are expecting at least 58 basis points (bps) of easing by the Federal Reserve by year-end.

The data initially weighed on the Dollar, which so far has recovered some ground, on breaking news that the Trump administration is considering current Fed Governor Christopher Waller to become the next Fed Chair.

The US Dollar Index (DXY), which tracks the performance of the buck's value against a basket of its peers, is up 0.15% at 98.34. The news drove the GBP/USD from around 1.3430 to 1.3410.

In the meantime, Atlanta's Fed President Raphael Bostic reiterated his view that one cut is appropriate for this year but added that there is a lot of data before the next meeting.

Source: fxstreet