Pound Strengthens As Boe Appears To Follow Moderate Policy Easing Cycle
The pound (GBP) strengthened against other major currencies on Friday (28/2) as investors expected the Bank of England's (BoE) monetary easing cycle to be more moderate this year than other central banks in major economies. Traders have priced in two interest rate cuts by the BoE. In contrast, the European Central Bank (ECB) is expected to cut interest rates three times and the Federal Reserve (Fed) is anticipated to cut by 60 basis points (bps).
Market participants have priced in a slower BoE policy easing cycle due to strong wage growth. Average Earnings Excluding Bonuses in the three months to December rose to 5.9%, the highest level seen since April 2024.
BoE Deputy Governor Dave Ramsden also said in a speech at Stellenbosch University in South Africa during early European trading hours on Friday that wage growth was "stronger than he had expected". However, Ramsden remains confident that the “core deflationary process remains intact.” On the global front, he said it is difficult to determine whether the impact of US President Donald Trump’s tariffs will be “inflationary or deflationary” on the economy.
Meanwhile, a meeting between UK Prime Minister Keir Starmer and US President Donald Trump on Thursday ended without a deal. However, Trump said there was a “very good chance” of a trade deal “where tariffs are not needed.” Trump added that such a deal could be done “quite quickly,” the BBC reported.
Source: FXStreet
