Pound Rises After Bank of England’s Cautious Pause, but Momentum Fades

The British pound strengthened slightly on Thursday after the Bank of England decided to keep interest rates unchanged, signaling a cautious but potentially shifting stance on monetary policy. The decision revealed growing division among policymakers, with several members favoring a rate cut — a sign that the central bank may soon begin easing its policy if economic data continue to soften.

Governor Andrew Bailey acknowledged that inflation pressures have eased but emphasized that it is too early to declare victory. He said the bank still needs more evidence that inflation is steadily moving toward its target before cutting rates further. The message underscored a tone of caution rather than commitment to immediate action.

In the United States, a sharp rise in job cuts fueled expectations that the Federal Reserve could move closer to reducing its own rates by the end of the year. The slowdown in the labor market, coupled with the highest unemployment reading in four years, has reinforced concerns about a weakening economy despite recent signs of resilience.

For the pound, the combination of a more flexible Bank of England and growing expectations of US policy easing helped it recover some ground. Still, analysts say the currency’s upward momentum remains limited, as both economies face uncertainty and investors await clearer signals before making stronger bets.

The overall outlook remains one of cautious optimism — the pound has found some support, but sustained strength will depend on how both central banks navigate the delicate balance between fighting inflation and supporting growth.