Pound Sterling trades lower in countdown to BoE policy decision
|- The Pound Sterling falls against its major currency peers ahead of the BoE’s monetary policy announcement.
- Investors expect the BoE to hold interest rates steady at 3.75%.
- The Fed is expected to maintain the status quo in the next two policy meetings.
The Pound Sterling (GBP) trades lower against its major currency peers on Thursday ahead of the Bank of England’s (BoE) interest rate decision at 12:00 GMT.
Investors expect the BoE to keep interest rates unchanged at 3.75%, with a 7-2 split, as the central bank reduced borrowing rates in its last meeting in December, and guided that the monetary policy will remain on a “gradual downward path”. Monetary Policy Committee (MPC) members Swati Dhingra and Alan Taylor are expected to be the ones to advocate for another interest rate cut of 25 basis points (bps).
Assuming that the BoE will maintain the status quo, the major driver for the British currency will be the Monetary Policy Report and Governor Andrew Bailey’s press conference, which would provide fresh cues on the interest rate outlook.
BoE officials will likely support the continuation of the monetary easing path as employment conditions remain weak, and the price pressures are expected to return to the central bank’s 2% target in the near term. The ILO Unemployment Rate has remained elevated at 5.1% in the last two months, the highest level seen since January 2021.
In the last policy meeting, the BoE projected inflation to return to the 2% target in the second quarter of 2026; however, price pressures accelerated in December after cooling down in October and November.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.68% | 0.25% | 0.23% | 0.33% | 0.26% | 0.15% | |
| EUR | -0.17% | 0.50% | 0.07% | 0.05% | 0.17% | 0.09% | -0.02% | |
| GBP | -0.68% | -0.50% | -0.43% | -0.44% | -0.33% | -0.40% | -0.52% | |
| JPY | -0.25% | -0.07% | 0.43% | -0.03% | 0.09% | -0.01% | -0.09% | |
| CAD | -0.23% | -0.05% | 0.44% | 0.03% | 0.12% | 0.03% | -0.08% | |
| AUD | -0.33% | -0.17% | 0.33% | -0.09% | -0.12% | -0.08% | -0.19% | |
| NZD | -0.26% | -0.09% | 0.40% | 0.00% | -0.03% | 0.08% | -0.11% | |
| CHF | -0.15% | 0.02% | 0.52% | 0.09% | 0.08% | 0.19% | 0.11% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily Digest Market Movers: The Fed is expected to hold rates steady in March and April
- The Pound Sterling trades 0.20% lower against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair weakens as the US Dollar extends its rally amid firm speculation that the Federal Reserve (Fed) will hold interest rates steady for another two meetings ahead.
- The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh over-a-week high at 97.82.
- Traders seem confident that the Fed will keep interest rates unchanged in the range of 3.50%-3.75% in its policy meetings in March and April, according to the CME FedWatch tool
- Fed dovish projections have cooled as inflationary pressures remain well above the central bank's 2% target, and the impact of recent interest rate cuts is yet to pass through the economy.
- On the economic data front, investors shift focus to the US JOLTS Job Openings data for December, which will be published at 15:00 GMT. US employers are expected to have posted 7.2 million fresh jobs, higher than the previous reading of 7.146 million.
- In Thursday’s session, investors will also focus on the European Central Bank’s (ECB) monetary policy announcement at 13:15 GMT. The ECB is also expected to leave borrowing rates unchanged, as various officials have expressed that monetary adjustments are not required unless there is a dramatic change in inflation and employment.
Technical Analysis: GBP/USD finds temporary support near 20-day EMA
GBP/USD trades lower at around 1.3623 as of writing. The price holds above the rising 20-day Exponential Moving Average (EMA) at 1.3601, keeping the short-term bias oriented higher. The 20-day EMA has been ascending, and continued closes above it would favor trend extension.
The 14-day Relative Strength Index (RSI) at 55 (neutral) has eased from prior overbought readings, indicating bullish momentum has cooled yet remains on the positive side of the midline.
Momentum would improve if the price continues to hold above the average, and pullbacks would be supported on first tests of the 20-day EMA at 1.3601. A break below that barrier could shift the bias lower and expose a deeper retracement towards the psychological level of 1.3500. Looking up, the February 4 high of 1.3733 and the four-year high of 1.3870 will be key barriers.
(The technical analysis of this story was written with the help of an AI tool.)
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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