Pound sterling is experiencing strong demand as the Bank of England is projected to maintain the tight policy for an extended period of time.

The Pound Sterling (GBP) hits a new weekly high in the early European session on Friday. As the Bank of England (BoE) is expected to begin lowering interest rates. Following the Federal Reserve (Fed) and the European Central Bank (ECB), and market players’ risk appetite has strengthened.

Recent monetary policy pronouncements from Federal Reserve Chair Jerome Powell. European Central Bank President Christine Lagarde. And Bank of England Governor Andrew Bailey suggested that the first Two were more specific about rate decreases. The Fed has already directed three rate cuts this year. And the ECB’s Lagarde believes the central bank will begin the rate-cutting process in late July.

Hawkish interest rate forecast has exacerbated UK recession fears.

Andrew Bailey, like Jerome Powell, dismissed discussion about rate cuts. While warning that price pressures could rise again in the second half of the year. The BoE chose to ease strong pricing pressures rather than face deepening recession fears. The UK economy experienced a 0.1% fall in growth in the third quarter of 2023. And rising interest rates are likely to continue to impede economic growth.

The GBPUSD pair holds gains but may face volatility ahead as the United States Bureau of Labor Statistics (BLS) labor data the Nonfarm Payrolls (NFP) are released for January. Upbeat labor market data would reduce the likelihood of the Fed cutting interest rates in May.

Daily Market Movers: Pound Sterling Rises as Market Sentiment Improves.

Pound Sterling is hovering near a weekly high of roughly 1.2750. Following a significant surge against the US dollar as investors await the US NFP report.

The Pound Sterling is likely to rise more as market sentiment improves. And the Bank of England did not indicate anything about interest rate decreases in its monetary policy decision on Thursday.

In the monetary policy statement, BoE Governor Andrew Bailey stated that a win cannot be announced on inflation since, while price increase is predicted It is predicted to dip to 2% in the second quarter of 2024 before rising again in the third quarter.

The Bank of England advised maintaining interest rates low until there was sufficient indication that inflation would return to the 2% target on a sustainable basis.

While Andrew Bailey did not support further quantitative tightening, policymakers Jonathan Haskel and Catherine Mann voted to raise interest rates by 25 basis points. Swati Dhingra of the Bank of England voted in favor of a similar rate drop.

Higher interest rates are projected to exacerbate the UK’s labor market circumstances. The BoE’s most recent predictions report predicts that the unemployment rate would rise to 5% by the end of 2026.

The prognosis for the UK economy is more susceptible currently. Since lengthier restrictive monetary policies may fade business. optimism. To avoid increased installment obligations, factories may delay from making new investments.

The US dollar remained under pressure ahead of the US NFP data.

Meanwhile, the US Dollar Index (DXY) is falling sharply on expectations. That the Fed will lower interest rates in May, despite Chair Jerome Powell’s refusal to speculate on rate cuts.

Jerome Powell stated that interest rates should remain higher until the Fed is more certain. That inflation will return to the 2% target on a sustainable basis.

Today’s session will be dominated by the US NFP report. Which is scheduled to be released at 13:30 GMT.

Furthermore According to estimates, US firms employed 180K workers in January. Down from 216K in December. The unemployment rate is predicted to rise to 3.8% from the previous report of 3.7%.

Moreover The average hourly earnings statistics will Aside from the labor numbers. They will be closely monitored. This would offer a new perspective on inflation. Higher salary growth boosts retail demand, fueling price pressures.