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The British Pound weakened against the US Dollar following the Bank of England’s decision to keep interest rates unchanged at 3.75%. This “dovish hold” came after a split vote of 5–4, indicating the possibility of further easing ahead as inflation is expected to undershoot the target. Despite weak US labor data boosting expectations of Federal Reserve rate cuts, the Sterling continued to decline, trading at 1.3529, down by 0.90%.
Sterling’s Downtrend and BoE’s Outlook
The Bank of England’s latest projections suggest that inflation may reach the 2% target by the first quarter of 2028, with GDP growth expected at 0.9% in 2026, 1.5% in 2027, and 1.9% in 2028. Wage growth is projected to remain steady at 3.25%. The market has fully priced in an interest rate cut in April, reflecting a 72% probability, according to data from Prime Market Terminal.
US Labor Data and Its Impact
On the US side, recent labor reports showed a significant increase in layoffs, with companies announcing over 108,000 job cuts, a 118% rise compared to the previous year. Initial jobless claims also rose sharply to 231,000, exceeding estimates. This data has led traders to anticipate further easing by the Federal Reserve, with market expectations now pricing in 56 basis points of rate cuts.
In the coming days, the UK will hear from the Bank of England’s Chief Economist, while the US will feature speeches from Federal Reserve officials and the University of Michigan’s Consumer Sentiment report. These events will provide further insights into the economic outlook and potential monetary policy shifts.
