The British Pound is facing downward pressure against the US Dollar, trading around $1.3670. This decline is influenced by a strengthening Dollar and cautious positioning ahead of the Bank of England’s (BoE) upcoming policy decision. While expectations for BoE rate cuts have decreased due to resilient UK data and high inflation, the Pound remains vulnerable to Dollar fluctuations driven by shifts in Federal Reserve leadership expectations and reduced bets on US rate cuts.
- The British pound weakened to around $1.367, moving further below the August 2021 high of $1.3847 reached on January 27.
- Markets largely expect the BoE to hold rates at 3.75 percent this week.
- Expectations for rate cuts have been scaled back, with investors pricing less than a 50 percent chance of more than one cut this year.
- Britain’s inflation remains the highest among G7 peers.
- Recent manufacturing PMI data showed activity at its strongest since August 2024.
- The pound has faced pressure from a firmer US dollar following shifts in Federal Reserve leadership expectations and reduced bets on US rate cuts.
- GBP/USD faces some increasing selling pressure, building on recent losses and revisiting the 1.3670 zone.
- Cable’s decline comes in response to the persistent advance in the Greenback.
- Traders have started to shift their focus to the upcoming BoE event.
- The British Pound might continue to be underpinned by supportive fundamentals, which tempered near-term Bank of England (BoE) rate cut expectations.
The current environment presents a mixed outlook for the British Pound. Domestically, strong manufacturing data and persistent inflation offer some support, potentially limiting the extent of any decline. However, the primary driver of the Pound’s movement appears to be external, particularly the strength of the US Dollar. Decisions and sentiment surrounding the Federal Reserve will likely exert significant influence, potentially outweighing the impact of domestic economic factors. The BoE’s upcoming policy decision will provide further insight into the Pound’s near-term trajectory.