GBP/USD falls from 1-month high, BoE expected to cut again

The GBP/USD currency pair retreated on Thursday, pulling back from a one-month high of 1.2550, as investors braced for the outcome of the Bank of England’s policy meeting later in the day.

The Bank of England is largely expected to cut its benchmark interest rate by 25 basis points to 4.50% at its February policy meeting. This would bring borrowing costs to their lowest level since May 2023.

“Indeed, at the height of the pound’s slump, there had been speculation about whether the BOE would cut at all at this meeting,” Deutsche Bank analysts wrote in an investor note.

Annual headline inflation in the UK slowed to 2.5% in December, while GDP growth remained weak, thus, supporting the case for another rate cut.

Investors will be looking for signals about subsequent BoE rate cuts, with three rate reductions currently priced in for this year.

In addition, any BoE remarks in regard to the recent government budget and US tariffs will also be closely watched.

Another highlight this week will be the crucial US Non-Farm Payrolls report, which may offer more insight into macroeconomic conditions and the Fed’s future interest rate path.

Employers in all sectors of the US economy, excluding farming, probably added 170,000 job positions in January, according to market consensus, following a job growth of 256,000 in December (the most since March 2024).

Markets now expect two interest rate cuts by the Federal Reserve this year. A 25 basis point rate reduction in July has been fully priced in and another 25 bps cut is expected prior to year-end.

The GBP/USD currency pair was last down 0.67% to trade at 1.2420.