Sterling is facing headwinds as economic data suggests a potential interest rate cut by the Bank of England, while the US Dollar’s strength is tempered by dovish Federal Reserve expectations. The GBP/USD pair is experiencing moderate fluctuations as markets await further economic data releases from both the UK and the US.
- Sterling remained near one-month lows against the dollar due to US tariffs.
- A new 10% US tariff, while lower than initially feared, creates planning difficulties for UK businesses.
- The UK unemployment rate climbed to 5.2%, the highest level since early 2021.
- Jobless claims in the UK rose to 28.8K in January, indicating a softening labor market.
- UK wage growth moderated to its lowest level in almost four years.
- Market expectations for a March interest rate cut by the Bank of England have increased.
- The US Dollar lacks strong bullish conviction due to expectations of Federal Reserve rate cuts.
The British Pound’s performance is being affected by a combination of factors. A softening labor market and slowing wage growth in the UK have increased the likelihood of an interest rate cut, placing downward pressure on the currency. While the US Dollar’s strength is limited by expectations of its own potential interest rate cuts, the Pound still faces challenges due to domestic economic concerns and external trade pressures. Upcoming inflation data will be important for determining near-term direction.