Sterling Stands Steady Ahead of BoE Decision

The pound remained stable on Tuesday amidst light economic activity, ahead of the Bank of England's imminent interest rate decision. Market players anticipate that rates will be held steady before possible cuts later in the year, as inflation recently surged above expectations amidst stronger economic data.

On Tuesday, the pound demonstrated stability in the face of a sparse economic calendar, with traders eyeing the Bank of England's interest rate verdict set for Thursday. In the currency market, sterling held flat against the U.S. dollar, closing at $1.3672, bolstered by unexpectedly robust economic statistics this year.

Analysts predict the Bank will maintain interest rates at 3.75% before potential reductions later in 2023. Despite Britain's inflation hitting a 3.4% annual increase in December—the most significant among the G7 nations—the Bank of England anticipates a return to its target inflation rate of 2% by mid-year.

With limited significant economic data expected until February, recent figures showing stronger GDP, improved retail sales, and increased business activity have contributed positively to the pound's value, particularly against the backdrop of a fluctuating dollar influenced by U.S. trade policy and Federal Reserve leadership transitions.

(With inputs from agencies.)