Services Inflation Holds Back Pound
GBP/USD moved relatively flat on Tuesday, hovering around 1.3500, after a sharp correction from its late-January peak near 1.3870. The pair is now consolidating within a narrow range, reflecting the market's continued awaited clarity on the direction of UK and US interest rate policy.
From the UK, Bank of England (BoE) Governor Andrew Bailey called the March interest rate decision a "completely open question." The BoE kept interest rates at 3.75% in February by a tight 5-4 vote, with Bailey being the deciding vote. He emphasized that services inflation had not softened as expected, with January's services inflation reaching 4.4%, higher than the BoE's projection of 4.1%, making the likelihood of a March rate cut uncertain.
Nevertheless, UK economic data showed quite positive signs. The February PMI indicated private sector activity grew at the fastest pace since April 2024, while January retail sales also exceeded expectations. However, the BoE remains cautious—including Chief Economist Huw Pill's warning that markets should not become complacent simply because headline inflation is approaching its 2% target.
From the US side, the minutes of the January FOMC meeting confirmed that the Fed remains inclined to maintain interest rates at 3.50%–3.75%, with some officials even discussing the possibility of a hike if inflation remains above target. Meanwhile, uncertainty regarding new global tariffs from the US continues to cloud risk sentiment, although the UK-US trade arrangement is considered unchanged for now. This combination of factors has led GBP/USD to move cautiously, with the market awaiting new catalysts from inflation data and central bank policy signals. (asd)
Source: Newsmaker.id
