The British pound weakened to $1.246 in anticipation of the Bank of England's interest rate decision, with markets widely expecting a 25 basis point cut to 4.5%.
Pound falls ahead of BoE decision
Although another cut isn't expected until June, concerns about the UK's stagnant economy persist. However, stubbornly high domestic inflation is likely to limit the BoE's ability to loosen monetary policy aggressively, making a dovish shift unlikely in the near term. Markets are pricing in three rate cuts for 2025, totaling 82 basis points of easing. Sentiment is also being affected by ongoing concerns about US tariffs.
Trade war worries, UK input costs soar
While the UK is unlikely to be directly impacted by Trump's trade policies, fears of a US-China trade war are raising concerns about global economic growth. Adding to the inflationary picture, the latest PMI data revealed that UK input price inflation surged to an 18-month high in January.
