FX.co ★ Sterling Falls Ahead BoE Decision

On Thursday, the British pound dipped to $1.296, retreating from a recent four-month high above $1.30. This shift occurred as traders recalibrated their positions pending the Bank of England's decision on interest rates and in response to newly released employment data. Market expectations for rate reductions this year have slightly increased, now reflecting an anticipation of a 53 basis-point decrease. The unemployment rate remained stable at 4.4%, while wage growth demonstrated a minor deceleration. Specifically, growth including bonuses stood at 5.8%, and at 5.9% when excluding bonuses—both figures aligning with forecasts. The Bank of England is expected to exhibit caution, navigating concerns tied to Donald Trump’s trade policies and domestic inflation pressures. With January’s inflation marked at 3%, surpassing prior expectations, the Bank is projected to hold the benchmark interest rate steady at 4.5%, maintaining a prudent approach regarding any additional rate cuts. In contrast, the U.S. Federal Reserve kept interest rates unchanged but signaled potential rate reductions later in the year.