GBP Faces Further Weakness Following BoE Rate Cut

GBP/USD declined after the Bank of England (BoE) cut interest rates as expected, according to Scotiabank’s Chief FX Strategist, Shaun Osborne. The decision placed additional pressure on the Pound Sterling (GBP), leading to further losses against the U.S. dollar.

GBP/USD Struggles Amid Policy Shift

The BoE reduced its policy rate by 25 basis points to 4.50%, meeting market expectations. However, two Monetary Policy Committee (MPC) members pushed for a larger 50bps cut, including Catherine Mann, who is typically more hawkish. The market reacted swiftly, with UK bond yields slipping and interest rate swaps pricing in an increased likelihood of further easing. BoE Governor Andrew Bailey reinforced a “gradual and careful approach” to additional rate reductions, signaling caution in future decisions.

GBP was already under pressure before the BoE announcement, following a disappointing UK Construction PMI report for January. The index unexpectedly dropped to 48.1, a sharp decline from December’s 53.3 reading, which had initially suggested economic resilience. Analysts had forecast a slight improvement, but the weaker-than-expected data added to bearish sentiment surrounding the currency.

In response, GBP/USD has extended its decline, sliding below the 40-day moving average of 1.2441 and approaching the 1.24 level. Short-term price action indicates that the pair formed a temporary peak at 1.2550 in the previous session. Ongoing corrective losses are now testing support levels in the mid-1.23 range, suggesting continued downside pressure in the near term.

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