Pound Sterling remains steady as BoE's Dhingra advocates for a swift monetary expansion cycle

The Pound Sterling (GBP) remains range-bound against its major peers on Tuesday as investors seek clarity on the Bank of England’s (BoE) monetary policy direction for the rest of the year. Earlier this month, the BoE cut its key borrowing rate by 25 basis points (bps) to 4.5% and signaled a gradual approach to policy easing.

However, BoE Monetary Policy Committee (MPC) member Swati Dhingra has advocated for a more aggressive monetary expansion, citing weak demand. Speaking at Birkbeck on Monday, Dhingra challenged the notion of a slow easing cycle, stating that cutting rates by 25 bps per quarter throughout 2025 would still leave policy overly restrictive. She emphasized that persistent consumption weakness necessitates a more decisive reduction in monetary policy constraints.

Dhingra, alongside policymaker Catherine Mann, had pushed for a 50 bps rate cut in the last policy meeting, while other MPC members favored a more measured quarter-to-a-percent reduction.

Meanwhile, markets have priced in two additional 25 bps rate cuts by the BoE this year, with expectations for the next move to come after the March policy meeting.

Daily Market Movers: Pound Sterling Holds Steady Against US Dollar

• The Pound Sterling (GBP) edges slightly higher to around 1.2635 against the US Dollar (USD) in Tuesday’s European session. GBP/USD gains modestly as the US Dollar Index (DXY), which measures the Greenback’s performance against six major currencies, trades subdued near 106.60 after rebounding sharply from a 10-week low on Monday.
• The US Dollar strengthened in the latter half of Monday amid renewed global trade war concerns after President Donald Trump reaffirmed that tariffs on North American partners would proceed as scheduled.
• “The tariffs are going forward on time, on schedule,” Trump stated during a joint press conference with French President Emmanuel Macron at the White House.
• On February 5, Trump postponed the 25% tariffs on Canada and Mexico for a month after securing agreements on stricter border enforcement measures to curb the flow of fentanyl and undocumented individuals into the U.S.
• Investors are now focused on key U.S. economic data releases later this week, including January’s Durable Goods Orders on Thursday and the Personal Consumption Expenditures (PCE) Price Index on Friday. The PCE inflation data, a key gauge for the Federal Reserve’s (Fed) monetary policy, will be closely watched for clues on the central bank’s next move.
• Fed officials have so far maintained a cautious stance on interest rates, keeping them in the 4.25%-4.50% range until they assess the full impact of Trump’s economic policies on inflation and growth.
• On Monday, Chicago Fed Bank President Austan Goolsbee emphasized the need for "more clarity" on the broader economic effects of Trump’s policies before considering rate cuts.

Technical Analysis: Pound Sterling Seeks Stability Above 38.2% Fibonacci Retracement