The British pound (GBP) rose against other major currencies on Wednesday as investors awaited the Bank of England's monetary policy announcement on Thursday. The rise was fueled by expectations that the Bank of England would keep interest rates unchanged at 3.75% at its first monetary policy meeting of 2026.

Market participants anticipate that the UK central bank will maintain its benchmark interest rate after cutting it by 25 basis points in December, signaling that monetary policy will remain on a gradual downward trajectory. Swati Dhingra and Alan Taylor, two of the nine members of the Monetary Policy Committee, are expected to vote in favor of a rate cut.

In mid-January, Taylor told a summit in Singapore that he believed inflation would return to the central bank's 2% target by "mid-2026, sooner than having to wait until 2027," and predicted that interest rates could "return to neutral sooner rather than later."

At its December policy meeting, officials also expressed confidence that inflation would approach 2% in the second quarter of 2026.

In addition to the Bank of England's interest rate decision, investors will be focusing on the quarterly monetary policy report, which will outline inflation forecasts for the next two years and the current state of the economy.

 

Daily Market Movers Roundup: Investors Await Key US Private Sector Employment and Services PMI Data

• The British pound edged up slightly to near 1.3700 against the US dollar and also rose to around 0.8635 against the euro during Wednesday's European trading session. The GBP/USD pair saw a slight increase as the pound's performance remained generally stable. The US dollar also strengthened ahead of the release of the January US ADP Employment Change and ISM Services PMI data during the North American trading session.
• At the time of writing, the US Dollar Index (DXY), which tracks the value of the US dollar against six major currencies, was up 0.15% at nearly 97.50.
• Investors will be closely watching the private sector employment and services PMI data for fresh clues about the state of the US economy and labor market, two key factors for the Federal Reserve when setting interest rates. Economists expect U.S. private-sector employers to have added 48,000 jobs, up from 41,000 in December. The Institute for Supply Management's services purchasing managers' index (PMI) is expected to decline to 53.5, from a previous reading of 54.4, suggesting that activity in the services sector has recovered, albeit at a moderate pace.
• Positive data from the U.S. private-sector labor market and the ISM services PMI would likely prompt traders to reduce their bets on a near-term Federal Reserve interest rate cut. Conversely, weaker data would strengthen these expectations.
• According to the CME FedWatch tool, the Fed is expected to cut its first interest rate at its June policy meeting after keeping rates unchanged in the 3.50%-3.75% range in March and April.
• Meanwhile, the U.S. House of Representatives approved funding to end the partial government shutdown on Tuesday. However, the U.S. non-farm payrolls data for January will not be released on Friday, according to the latest reports.

The GBP/USD pair is trading at approximately 1.3712 at the time of writing. The pair is holding above the 20-day exponential moving average (EMA) at 1.3605, supporting the short-term uptrend. The EMA has strengthened in recent sessions, indicating increasing upward pressure.

The 14-day Relative Strength Index (RSI) at 62 (positive) confirms the bullish momentum without any overbought conditions.

Maintaining a daily close above the 20-day EMA at 1.3605 would support the uptrend and encourage further gains towards a recap of the four-year high of 1.3866. However, a sharp close below this level would weaken the trend and lead to a deeper decline towards the psychological level of 1.3500.