Pound Sterling trades mixed as focus shifts to BoE policy announcement

• The Pound Sterling trades cautiously ahead of the BoE policy announcement on Thursday.
• Investors expect the BoE to leave interest rates unchanged .
• The US Dollar retraces after a two-day rally due to the partial US government shutdown.

The Pound Sterling (GBP) shows a mixed performance against its major currency peers on Tuesday as traders shift their focus to the Bank of England’s (BoE) monetary policy announcement on Thursday.

The BoE is expected to leave interest rates unchanged at 3.75%, with a 7-2 majority, suggesting that the decision will be almost unanimous this time after very divided outcomes in the previous two meetings.

Market participants predict that the BoE will maintain the status quo after the United Kingdom (UK) central bank delivered a 25 basis points (bps) reduction in interest rates in December and reiterated that the monetary policy will remain on a “gradual downward path”.

In addition to the BoE interest rate decision itself, investors will focus on Governor Andrew Bailey’s press conference to get fresh cues over the job market and inflation outlook. In the last meeting, BoE officials expressed confidence that “inflation will come closer to 2%” in the second quarter of 2026.

Daily Digest Market Movers: Pound Sterling gains against US Dollar, drops vs. Euro

• The Pound Sterling trades 0.25% higher to near 1.3710 against the US Dollar (USD), and slightly lower to near 0.8630 against the Euro (EUR) during the European trading session on Tuesday. The GBP/USD pair gains marginally higher as the US Dollar (USD) ticks lower due to uncertainty amid the partial US federal government shutdown.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls 0.25% to near 97.35. The DXY corrects from a weekly high of 97.73 posted on Monday.
• The US Dollar outperformed in the last two trading days, following Kevin Warsh’s nomination as the Federal Reserve’s (Fed) new chairman and fresh survey data suggesting that the United States (US) manufacturing sector returned into growth.
• On Monday, the ISM reported that the Manufacturing Purchasing Managers’ Index (PMI) jumped to 52.6 in January from 47.9 in December. A figure above 50 indicates expansion in business activity.
• Going forward, investors will focus on the US ADP Employment Change and the ISM Services PMI data for January. Investors will pay close attention to the US private-sector employment data to get fresh cues on the labor demand. The delay in the US Nonfarm Payrolls (NFP) data release for an unknown period amid the government shutdown also increases the significance of the private job data.
• Meanwhile, the EUR/GBP pair trades cautiously ahead of monetary policy announcements by both the BoE and the European Central Bank (ECB) on Thursday. The ECB is expected to leave interest rates unchanged as price pressures have broadly remained close to the Eurozone central bank’s target.
• Ahead of the ECB policy announcement, investors will focus on the Eurozone preliminary Harmonized Index of Consumer Prices (HICP) data for January, which will be released on Wednesday.

Technical Analysis: GBP/USD stays firmly above 20-day EMA

GBP/USD trades higher at around 1.3710 at the time of writing. Above the rising 20-day Exponential Moving Average (EMA), the pair maintains a bullish near-term structure. The 20-day EMA has curled higher in recent sessions, confirming renewed trend strength.

The 14-day Relative Strength Index (RSI) finds cushion near 60.00 after cooling down from overbought levels around 80.00, backing scope for a fresh rally.

A daily close under the average could slow the advance and pivot the pair into consolidation, whereas sustained strength above it would keep buyers in control.

(The technical analysis of this story was written with the help of an AI tool.)