Anna 
The Pound Sterling (GBP) remains indecisive during Monday’s European session, with investors adopting a cautious stance ahead of upcoming interest rate decisions by both the Federal Reserve (Fed) and the Bank of England (BoE) later in the week.
Market sentiment is subdued as investors await clarity on monetary policy direction from both central banks. The Fed’s decision is scheduled for Wednesday, followed by the BoE’s announcement on Thursday.
Anticipation surrounds the BoE’s decision regarding interest rates, with expectations leaning towards the central bank maintaining rates at the current level of 5.25%. This comes as inflation in the UK exceeds the desired rate of 2%. Investors will closely scrutinize the BoE’s guidance on interest rates, particularly for indications of how long rates will remain elevated.
Market consensus suggests that the BoE may initiate interest rate reductions at its August policy meeting. However, policymakers have emphasized that rate cuts will only be considered if there is convincing evidence of sustained inflation approaching the 2% target.
The BoE faces a delicate balancing act between addressing high inflation and navigating uncertainty surrounding economic growth. Despite a modest 0.2% growth in January, the UK economy experienced a technical recession in the second half of 2023, marked by contractions in the preceding quarters. The latest data indicates a tentative recovery, but it remains insufficient to confirm sustained growth for the first quarter as a whole.
As investors await further clarity from the upcoming central bank decisions, the Pound Sterling remains subdued, with market participants closely monitoring developments for potential shifts in monetary policy direction.
