The British pound is experiencing mixed market signals. It has weakened slightly against the US dollar, influenced by expectations surrounding the Bank of England’s upcoming policy decision and shifts in Federal Reserve leadership expectations. However, supportive fundamentals are tempering losses, limiting expectations for aggressive Bank of England rate cuts. Despite a stronger dollar, the pound has managed to reclaim some ground, driven by resilient UK data and persistent inflation.
- The pound weakened to around $1.37, below its August 2021 high.
- Markets largely expect the Bank of England to hold rates at 3.75%.
- Expectations for rate cuts have been scaled back due to resilient UK data and high inflation.
- Recent manufacturing PMI data showed activity at its strongest since August 2024.
- The pound has faced pressure from a firmer US dollar.
- GBP/USD builds on Tuesday’s gains, advancing for the second day in a row and reclaiming the 1.3700 barrier.
- The British Pound might continue to be underpinned by supportive fundamentals, which tempered near-term Bank of England (BoE) rate cut expectations.
The British pound is navigating a complex landscape, facing headwinds from a strengthening dollar and uncertainty surrounding the Bank of England’s future monetary policy. While the expectation is for the central bank to maintain current interest rates, economic data coming out of the UK is supportive of a stronger currency, and limiting substantial losses. Strong fundamentals could ultimately support the currency’s value.