British pound rises amid stable BoE expectations
The British pound advanced against the U.S. dollar on Tuesday, gaining as much as 0.3% to $1.3645 before settling slightly lower at $1.3624. Despite a decline in UK payrolls and slowing wage growth, investors remained confident that the Bank of England will hold interest rates steady at its upcoming meeting. This outlook helped support sterling, even as the U.S. dollar weakened ahead of an expected Federal Reserve rate cut.
The euro also strengthened against the pound, rising 0.2% to 86.65 pence, though remaining within a tight recent range. The currency moves highlight a broader market focus on diverging monetary policy paths between the U.S. and the UK.
UK labor data shows signs of cooling
According to the Office for National Statistics, UK payrolls declined for the seventh month in a row, and private sector wage growth dipped slightly to 4.7% from 4.8% in the previous quarter. The data signals a potential easing in labor market pressure, which may help temper inflation concerns among BoE policymakers.
However, analysts suggest that the figures are unlikely to shift the Bank of England’s immediate stance. “UK labour data showed tentative signs weakness may have bottomed out over the summer, though the figures are unlikely to alter the near-term BoE outlook,” said Michael Brown, senior research strategist at Pepperstone.
Fed rate cut expectations weigh on U.S. dollar
The U.S. dollar continued to lose ground against a basket of major currencies as investors brace for a widely anticipated 25 basis point rate cut by the Federal Reserve. This potential policy move comes amid a slowdown in U.S. job growth and signals a more dovish trajectory for monetary policy.
Lee Hardman, senior currency analyst at MUFG, noted that the pound may continue to benefit from expectations of a policy divergence between the BoE and the Fed. The higher yield environment in the UK could attract more capital inflows, supporting sterling in the near term.
UK and U.S. announce $10 billion in trade deals
On the political front, President Donald Trump’s second state visit to the UK has brought renewed focus to transatlantic economic ties. Both nations are set to unveil more than $10 billion in energy and technology agreements this week. The deals are part of a broader effort by London to advance trade negotiations and resolve lingering issues such as steel tariffs.
These developments further underscore the intertwined economic interests of the two countries, even as their central banks pursue different monetary paths.
