Anna 
In Thursday’s London session, the Pound Sterling (GBP) is demonstrating strength against the US Dollar, driven by expectations that the Bank of England (BoE) will initiate interest rate cuts following the Federal Reserve (Fed). Market consensus points to potential rate cuts by the BoE and the Fed in their June and August policy meetings, respectively.
Investors anticipate that the BoE may delay its rate cut compared to other central banks in the Group of Seven economies (G-7), supporting the GBP’s relative strength. Additionally, optimism stems from the UK’s budget announcement for 2024, where Chancellor of the Exchequer Jeremy Hunt outlined plans to reduce public sector net debt and budgetary deficit while supporting economic growth.
The scope of fiscal stimulus outlined in the budget contributes to the Pound Sterling’s positive performance. Looking ahead, the release of the UK’s Average Earnings data for the three months ending in January, scheduled for early next week, will offer fresh insights into inflation. Strong wage growth, exceeding the level required for the return of inflation to 2%, could dampen market expectations for rate cuts, further benefiting the Pound Sterling against the US Dollar. The GBP’s movements will continue to be influenced by central bank decisions, economic data, and geopolitical developments.
