Pound Sterling gains despite BoE Mann seems worried about UK demand outlook
- The Pound Sterling gains even though BoE official Catherine Mann is concerned over weak demand and guides cracks in the labor market.
- US President Trump imposes 25% tariffs on steel and aluminum and is poised to announce reciprocal tariffs.
- Investors await BoE Bailey and Fed Powell’s speech on Tuesday.
The Pound Sterling (GBP) outperforms its major peers in North American trading hours on Tuesday despite Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann's dovish commentary on the interest rate guidance in an interview with Financial Times (FT) earlier in the day.
Investors were keenly awaiting Catherine Mann’s interview to know the reasons that forced her to favor a bigger interest rate reduction in the previous week’s policy meeting after being an outspoken hawk for a longer period.
Mann said that she changed her mind on policy as “demand conditions are quite a bit weaker than has been the case”. So, a 50 basis points (bps) rate cut call from her was a way to communicate traders about “what we think are the appropriate financial conditions for the United Kingdom (UK) economy”.
When asked about her outlook on inflation and demand, Mann was confident about inflation being consistent with the BoE’s target of 2% later this year and seeing a “non-linear” fall in employment.
Last week, the BoE reduced its key borrowing rates by 25 bps to 4.5%, as expected, with a 9-0 vote split. Seven MPC members voted for a 25-bps interest rate reduction. Surprisingly, Catherine Mann joined MPC member Swati Dhingra and favored a larger-than-usual rate cut.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.18% | 0.27% | 0.10% | -0.02% | -0.07% | 0.20% | |
| EUR | 0.14% | -0.06% | 0.39% | 0.24% | 0.11% | 0.06% | 0.35% | |
| GBP | 0.18% | 0.06% | 0.45% | 0.29% | 0.15% | 0.11% | 0.39% | |
| JPY | -0.27% | -0.39% | -0.45% | -0.17% | -0.30% | -0.35% | -0.06% | |
| CAD | -0.10% | -0.24% | -0.29% | 0.17% | -0.12% | -0.17% | 0.10% | |
| AUD | 0.02% | -0.11% | -0.15% | 0.30% | 0.12% | -0.05% | 0.23% | |
| NZD | 0.07% | -0.06% | -0.11% | 0.35% | 0.17% | 0.05% | 0.28% | |
| CHF | -0.20% | -0.35% | -0.39% | 0.06% | -0.10% | -0.23% | -0.28% |
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: Pound Sterling rises against USD with Fed Powell's testimony on the horizon
- The Pound Sterling trades higher against the US Dollar (USD) around 1.2390 in Tuesday’s North American session. The GBP/USD pair rises as the US Dollar ticks lower ahead of Federal Reserve (Fed) Chair Jerome Powell’s testimony before Congress at 15:00 GMT. Powell is also scheduled to testify before Congress on Wednesday.
- Investors will pay close attention to Fed Powell's commentary on interest rates. In the January policy meeting, Jerome Powell said that monetary policy adjustments would become appropriate only when the Fed will see “real progress in inflation or at least some weakness in the labor market”.
- The outlook of the US Dollar remains firm on the assumption that the impact of 25% tariffs on steel and aluminum imports by all nations into the United States (US) will be inflationary.
- On Monday, US President Donald Trump signed executive orders to impose 25% tariffs on all imports of steel and aluminum and confirmed that no country would be exempt from the duties, which will come into effect from March 12. Trump added that he will also announce reciprocal tariffs in the coming days.
- Market participants worry that US importers will bear the impact of higher metal prices. This scenario would be inflationary for the economy, as business owners would pass on the impact of higher input prices to end consumers. This would force Federal Reserve (Fed) officials to wait more months before resuming the policy-easing cycle, which the central bank paused in January. For meaningful cues on the interest rate outlook, investors will focus on
- This week, investors will also focus on the US Consumer Price Index (CPI) data for January, which will be released on Wednesday.
Technical Analysis: Pound Sterling faces selling pressure near 50-day EMA
The Pound Sterling rises to near 1.2390 against the US Dollar in North American session on Tuesday.However, the outlook of the GBP/USD pair remains bearish as the 50-day Exponential Moving Average (EMA) around 1.2484 continues to be a major barrier for the Pound Sterling bulls.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, suggesting a sideways trend.
Looking down, the January 13 low of 1.2100 and the October 2023 low of 1.2050 will act as key support zones for the pair. On the upside, the December 30 high of 1.2607 will act as key resistance.
(This story was corrected on February 11 at 09:20 GMT to say that steel and aluminum tariffs will come into effect on March 12, not March 4.)
Economic Indicator
Fed's Chair Powell testifies
Federal Reserve Chair Jerome Powell testifies before Congress, providing a broad overview of the economy and monetary policy. Powell's prepared remarks are published ahead of the appearance on Capitol Hill.
Read more.Next release: Tue Feb 11, 2025 15:00
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Source: Federal Reserve
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
