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Pound Steady: UK Rate Holds Ahead of BoE Decision
3 Feb
Summary
- Pound remained flat against the dollar ahead of Bank of England's rate decision.
- UK inflation hit 3.4% in December, highest in G7 nations.
- Stronger recent data boosted pound, with rate cuts expected later in 2026.
As of Tuesday, February 3, 2026, the British pound showed little change against the dollar, holding steady at $1.3672. This stability occurred against a backdrop of a light economic calendar, with traders awaiting the Bank of England's crucial interest rate decision scheduled for Thursday.
Analysts widely expect the Bank of England to keep its benchmark interest rate at 3.75% during its upcoming meeting. However, projections suggest potential rate cuts may occur once or twice before the end of 2026.
Recent economic indicators have bolstered the pound's performance this year. November's GDP figures surpassed expectations, and retail sales and business activity saw positive upticks in December and January, respectively. This has contributed to the pound's appreciation against both the dollar and the euro.
However, inflation in Britain rose to 3.4% in December, marking the highest rate among the Group of Seven nations. The Bank of England anticipates inflation will return to its 2% target by mid-2026. Some analysts suggest that delayed expectations for Bank of England rate cuts are currently supporting the pound's strength.
