Pound Sterling Capped after Dovish Bailey Remarks

– Written by


Frank Davies

STORY LINK Pound Sterling Capped after Dovish Bailey Remarks

The Pound to US Dollar (GBP/USD) exchange rate traded without clear momentum on Tuesday after remarks from Bank of England Governor Andrew Bailey struck a notably cautious tone during parliamentary testimony.

At the time of writing, GBP/USD hovered near $1.3498, broadly unchanged from the start of the European session.

Sterling weakened against several major counterparts as investors assessed comments delivered by Andrew Bailey during his appearance before the Treasury Committee.

Questioned on the outlook for inflation and monetary policy, Bailey expressed confidence that price growth should fall back to the Bank’s 2% target by late spring, bolstering expectations that the Bank of England may cut interest rates in March.

Adding to the softer tone surrounding the Pound, the Confederation of British Industry’s latest distributive trades survey revealed a sharp drop in retail activity during February, with adverse weather conditions cited as a key drag on consumer spending.

The US Dollar held relatively steady following the release of upbeat employment figures from the ADP payroll report.

Data indicated hiring momentum strengthened in early February, suggesting underlying resilience within the US labour market. This reinforced expectations that the Federal Reserve may feel little urgency to begin easing monetary policy in the near term.

Even so, investors remained cautious ahead of President Donald Trump’s State of the Union address later in the day, amid speculation that renewed tariff proposals could reintroduce volatility to currency markets.

Short-Term GBP/USD Forecast: Political and Fed Signals in Focus

The approaching Gorton and Denton by-election later this week may increasingly influence the direction of the Pound US Dollar exchange rate.

The vote is widely viewed as an important political test for Prime Minister Keir Starmer, whose leadership has come under growing scrutiny in recent weeks. Any disappointing outcome for Labour could heighten political uncertainty and weigh on Sterling sentiment.

At the same time, attention among US Dollar investors will turn to scheduled speeches from several Federal Reserve officials.

Should policymakers maintain a firm stance on interest rates, the US Dollar may regain additional support and extend pressure on GBP/USD.

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TAGS: Pound Dollar Forecasts