GBP/USD: Pound steadies after plunge on BoE rate cut bets

Sterling hovers near one-month low as markets price in 75% chance of June rate cut.

GBP/USD: Pound steadies after plunge on BoE rate cut bets
British Pound / U.S. Dollar

The British pound steadied on Monday but remained pinned near its lowest level in a month after investors ramped up bets last week that the Bank of England (BoE) will cut interest rates as soon as June.

Sterling (GB/USD) traded flat at $1.2614, not far from Friday's one-month trough of $1.2576. The pound shed around 1% versus the dollar last week after the BoE held its benchmark rate at 5.25% but Governor Andrew Bailey signalled potential rate cuts later this year, saying inflation is "moving in the right direction."

Gold caught between dollar strength and rate cut expectations
Gold prices struggle amid dollar strength, trapped between $2,150-$2,195 as investors await key U.S. data.

Bailey's comments to the Financial Times that rate reductions are "in play" in 2024 caused sterling to extend losses on Friday. Money markets now price in a roughly 75% chance of a rate cut by the BoE's June meeting, up from about 35% before last week, buoyed by data showing UK inflation cooling faster than anticipated.

In contrast, resilient US economic data has dampened expectations for an imminent rate cut by the Federal Reserve, bolstering the appeal of US bonds and supporting the dollar against its rivals.

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