Pound Holds Steady Above 1.32 as Markets Weigh BoE Inflation Warnings and Softer Dollar Momentum

The British Pound held its ground on Thursday, trading narrowly higher at 1.32404 against the US Dollar—up 0.01% from the previous close—in a restrained session shaped by cautious positioning ahead of key central-bank decisions. The currency moved within a tight daily range between 1.32098 and 1.32685, reflecting a market unwilling to commit to a decisive direction.

This week’s performance has been notably stronger, with the Pound rising 1.32%, yet broader trends remain mixed. The currency is still down 0.68% over the past month and 1.80% over the last six months, even as it maintains a solid year-to-date gain of 5.86%. The pair’s stability around the 1.32 handle suggests traders are balancing domestic inflation risks against a softening US Dollar.

BoE Signals Continue to Shape Sentiment

Investor attention remains firmly on the Bank of England after policy remarks highlighted a worrying rise in inflation expectations across UK businesses. Officials warned that firms are increasingly pricing in future cost pressures beyond what fundamentals justify—raising the risk of second-round effects on wages and services prices.

Although early surveys show wage settlements stabilizing around 3.5%, the Bank emphasized that it stands ready to tighten policy again if expectations drift away from the 2% inflation target. That message has amplified caution in Sterling markets, particularly as services inflation remains the most persistent component of the UK’s price landscape.

Dollar Drift Offers the Pound Breathing Room

Across the Atlantic, expectations of a potential Federal Reserve rate cut next month continue to weigh on the US Dollar. The softer tone in the Dollar has helped the Pound maintain its recent footing, preventing deeper pullbacks despite lingering inflation concerns in the UK.

Cross-Currency Moves: A Day of Mild Adjustments

The Pound’s performance across other major currencies reflected a steady but unspectacular trading day:


These moves underline a market in consolidation mode rather than directional positioning.

What Traders Are Watching Next: The next catalysts for the Pound include:

1. Upcoming UK inflation data, crucial for assessing the BoE’s warning about rising expectations.

2. The Federal Reserve’s pre-decision communications, which may confirm or soften rate-cut expectations.

3. Sterling’s behavior around the 1.32–1.33 zone, a key resistance region that could determine the next trend leg.

For now, the Pound sits at the intersection of a hawkish BoE narrative and a cooling Dollar, leaving the market finely balanced and open to sharp shifts if data surprises in either direction.