The British Pound is facing headwinds as weaker-than-expected UK economic data and a dovish stance from the Bank of England (BoE) weigh on the currency. Investors are pricing in further monetary easing, while political uncertainty adds another layer of pressure. Although the Pound is holding above the 1.3600 level against the US Dollar, its recovery is limited by these concerns.
- UK Q4 GDP expanded by 0.1%, falling short of forecasts.
- Annual GDP rose 1.0%, the slowest expansion since Q2 2024.
- The Bank of England (BoE) left interest rates unchanged but signaled future rate cuts.
- Investors are pricing in a 50 bps BoE rate cut this year.
- UK Prime Minister Keir Starmer faces political turmoil.
- The US Dollar (USD) is weakening amid bets on Federal Reserve rate cuts.
- Focus remains on upcoming US Retail Sales, Nonfarm Payrolls (NFP), and inflation data.
Overall, this signifies a challenging environment for the British Pound. The combination of sluggish economic growth, a central bank leaning towards easing monetary policy, and domestic political instability creates downward pressure on the currency. While a weaker US Dollar might offer some support, the Pound’s trajectory appears to be heavily influenced by internal factors and upcoming US economic data that could influence Federal Reserve policy.