The British pound rose to $1.295, edging closer to the over four-month high of $1.3 reached last week, as upbeat PMI figures signaled signs of an economic recovery.
Sterling edges up, close to four-month high
The latest PMI data showed significant expansion in the services sector, fueled by rising demand in financial and consumer services, reinforcing optimism about the UK’s economic resilience.
As a result, traders have adjusted their expectations for monetary policy, now seeing a 60% probability of a quarter-point rate cut by the Bank of England in May—down from earlier forecasts of a more aggressive easing cycle. Additionally, HSBC revised its outlook, predicting a more gradual rate-cutting trajectory, with the BoE’s key rate expected to reach 3% by the third quarter of 2026, suggesting a prolonged period of cautious policy adjustments.
Focus on Spring Statement
Meanwhile, in the US, the Federal Reserve reaffirmed its outlook for two interest rate cuts later this year, reflecting its confidence in slowing inflation while maintaining economic stability. Investors are now turning their focus to Chancellor Rachel Reeves’ upcoming Spring Statement on Wednesday, which is expected to provide key insights into fiscal policy, economic growth projections, and potential tax or spending adjustments amid an evolving economic landscape.
