GBP gained strength against both the Euro and the Dollar as the Bank of England conveyed a clear reluctance to entertain the idea of interest rate cuts. The Bank Rate remained at 5.25%, in line with expectations, and the Bank indicated its readiness to increase interest rates if necessary.

In a post-decision interview, Governor Andrew Bailey stated that he could not definitively assert that interest rates had reached their peak. The Monetary Policy Committee (MPC) voted 6-3 to maintain interest rates, with three members advocating for an increase to 5.5%.

The vote composition serves as an initial indicator of the MPC's stance, and economists interpreted the 6-3 split as a 'hawkish' outcome, supporting the Bank's narrative of a 'higher for longer' perspective on interest rates. The Bank's statement reiterated the need for sufficiently restrictive monetary policy to bring inflation back to the 2% target sustainably in the medium term.

In contrast, the U.S. Federal Reserve, endorsing market expectations, suggested the possibility of up to 150 basis points in rate cuts by 2024, putting downward pressure on the Dollar.

The Pound to Dollar exchange rate rebounded to 1.27 due to the divergent guidance from the Bank of England and the Federal Reserve. The Bank aims to suppress discussions of rate cuts, while the Fed adopts a more optimistic stance.

The Pound to Euro exchange rate surpassed 1.16 after the Bank's decision. Analysis of money market pricing reveals that the Pound rose in response to December's guidance as investors adjusted expectations in a 'hawkish' direction, delaying the anticipated start of the cutting cycle from May to June.

Governor Andrew Bailey welcomed the shift in market expectations, emphasizing that it's premature to speculate about cutting interest rates. He highlighted differences between the Bank's position and that of the U.S., reaffirming the commitment to monitor economic conditions closely.