The British pound climbed above the $1.25 mark, reaching its highest level since January 7, as a weaker U.S. dollar and anticipation surrounding the Bank of England’s (BoE) upcoming policy decision drove investor sentiment.
Sterling appreciates ahead of BoE decision
Markets are focused on Thursday’s BoE announcement, which will include updated GDP and inflation forecasts. Policymakers are widely expected to cut interest rates by 25 basis points to 4.5%, as slowing economic growth and easing services inflation support a more accommodative stance.
Beyond monetary policy, broader market sentiment remains cautious due to ongoing concerns over U.S. tariffs and their potential impact on global trade. While the UK is expected to be less directly affected by the Trump administration’s tariff policies, the growing risk of a full-scale trade war between the U.S. and China has fueled worries about a broader economic slowdown that could ultimately weigh on the UK economy.
Data impact on pound
On the domestic front, recent economic data has presented a mixed picture. The latest PMI report revealed that input price inflation in the UK surged to an 18-month high in January, suggesting lingering cost pressures despite overall disinflationary trends. Meanwhile, consumer confidence has remained fragile, with households continuing to grapple with elevated borrowing costs and uncertainties surrounding future economic conditions. As investors await the BoE’s decision, market volatility remains elevated, with traders closely watching for any signals on the central bank’s future policy direction.
