GBP/USD softens to near 1.3600 as BoE hints further rate cuts

GBP/USD edges lower to around 1.3610 in Monday’s early Asian session.
BoE reiterated that the policy will remain on a “gradual downward path,” weighing on the Pound Sterling.
The delayed release of the US employment report for January will be closely watched on Wednesday.

Lallalit Srijandorn FXStreet

The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling (GBP) softens against the Greenback amid growing expectations of the Bank of England’s (BoE) interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.

The Bank of England (BoE) kept interest rates on hold at 3.75% at its first meeting of 2026 last week. The UK central bank signaled that there is a high chance of an interest-rate cut in the near term, adding that monetary policy is being set to ensure that the inflation rate “not only reaches 2% but remains sustainably at that level in the medium term.

“We continue to expect the next rate cut in March. After that, we think the BOE will deliver a prolonged pause before resuming policy normalization in early 2027 (we see a terminal rate of 3.00% by mid-2027),” said Dani Stoilova, UK and Europe economist at BNP Paribas Markets 360.

Rumors that UK Prime Minister Keir Starmer could resign on Monday might weigh on the Cable against the US Dollar (USD). Pressure on Starmer has intensified amid the Mandelson–Epstein fallout and growing discontent within the party. Starmer is expected to face Members of Parliament at Monday’s Parliamentary Labour Party meeting, with further engagement with party caucuses also anticipated.

Traders brace for the delayed release of the US employment report for January for fresh impetus, which is due on Wednesday. The US economy is estimated to see 70,000 jobs added in January, while the Unemployment Rate is projected to remain unchanged at 4.4% during the same period. If the report shows weaker-than-expected outcomes, this could drag the USD lower and cap the downside for the major pair.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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