Pound remains firm, with upside gains extending on expectations of the Bank of England holding interest rates steady

The British pound continues to be bought in the market. As the Bank of England approaches its weekend interest rate decision, the pound has risen to its highest level in five months against the euro. Market participants generally expect the central bank to keep interest rates unchanged, which is supporting the pound’s strength.

Reaching a five-month high, buying dominates in the euro market

The pound’s rise reflects an improvement in market sentiment. According to Jin10 data, expectations that the Bank of England will maintain current interest rates are prevailing in the market, and investors are betting on the pound’s stability. This upward trend is not just a short-term fluctuation but suggests that investor confidence in the UK economy is gradually recovering.

Economic data improvements drive the market

In a recent report, Mitsubishi UFJ Bank analyst Lee Hardman noted that recent data indicating the UK economy remains solid. Hardman commented, “Unless there is a pressing reason for further rate cuts, the Bank of England is likely to remain cautious about additional rate reductions early this year.” This view aligns with market expectations of steady interest rates and supports a bullish outlook for the pound.

In the near term, expectations of rate cuts recede, and the pound may continue to be bought

Market participants widely believe that signs of economic improvement in the UK combined with the central bank’s cautious stance will keep the pound’s downside limited for the time being. The postponement of rate cuts is positive for pound investors. Until the Bank of England’s interest rate decision is announced, the pound is likely to remain firm.