Outlook
The BoE's 3.75% hold on February 5, in a 5-4 vote, signals a more cautious stance and keeps expectations for a June rate cut priced in by markets. With January services PMI at a five-month high but below the preliminary peak, UK data remain mixed. The pound is likely to remain range-bound near current levels, with momentum likely driven by the BoE’s forecast path and upcoming data surprises. Stronger signs from the BoE that policy will stay restrictive or a clearer shift toward earlier easing could support a push toward the 1.38–1.40 area against the dollar, while softer data or a sharper easing path could pull GBP back toward the 1.34–1.35 zone.
Key drivers
- BoE decision: hold at 3.75% with a dovish tilt; markets pricing around a 25bp cut by June; potential volatility from the BoE’s forecasts.
- Economic indicators: December retail sales +2.5% YoY; inflation at 3.4%; unemployment at 5.1%; mixed signals for policy.
- PMI: January final services PMI rose to its highest in five months but below the preliminary peak.
- Recent price moves: GBP/USD rose to 1.3705 on Feb 3; 7-day low near 1.3521; overall range cited 1.3050–1.3837.
- Crosses and levels: GBP/EUR around 1.1481 (14-day low); GBP/JPY near 212.0 (about 1.4% above its 3-month average of 209.1).
Range
- GBP/USD: 1.3050–1.3837; current around 1.37; 7-day low near 1.3521.
- GBP/EUR: 1.1322–1.1590; current around 1.1481.
- GBP/JPY: 202.0–214.2; current around 212.0.
What could change it
- A more hawkish BoE stance or a slower-than-anticipated path to cuts could push GBP toward 1.38–1.40.
- Softer UK data or a risk-off environment could pull GBP back toward 1.34–1.35.
- Shifts in USD strength, global policy divergence, or surprise UK data could alter cross-rate dynamics and trigger volatility.
