Forex News

Governor Andrew Bailey took questions from reporters, offering markets a clearer sense of how the central bank was thinking. His remarks followed the widely expected decision to keep the policy rate on hold at 3.75%.

BoE Bailey press conference highlights

Disinflation is on track and is running ahead of the schedule expected in November.

Recent developments provide more confidence that inflation is on track to return to the target soon.

It is necessary to ensure that inflation falls all the way back to 2% and stays there.

The economy is not currently facing a situation in which monetary policy is being hit by big new shocks.

There should be scope for some further easing of policy.

Services inflation and wage growth need to fall further for the MPC to be confident that inflation will return to target and remain there.

The upside risk to inflation has continued to diminish.

New Bank staff analysis provides reassurance that structural changes in wage setting will not continue to add to inflation pressure.

This section below was published at 12:00 GMT to cover the Bank of England's policy announcements and the initial market reaction.

At its February meeting, the Bank of England (BoE) held the policy rate at 3.75%, as markets had anticipated. The vote, however, exposed a split on the Monetary Policy Committee (MPC) as four members supported a 25-basis-point cut.

BoE policy statement takeaways

Andrew Bailey, Governor of the Bank of England, speaking after the February policy decision:

All going well, there should be scope for some further reduction in Bank Rate this year.

This does not mean I expect to cut Bank Rate at any particular meeting.

I expect CPI inflation to fall to around 2% in the spring, but we need to ensure it stays there.

Bank of England policy statement and Monetary Policy Report

• Policymakers voted 5–4 to hold Bank Rate at 3.75%, with Breeden, Dhingra, Ramsden and Taylor preferring a 25 basis point cut.
• The risk of greater inflation persistence has become less pronounced, although some downside risks from weaker demand and a looser labour market remain.
• Judgements around further policy easing will become a closer call.
• Bank Rate is likely to be reduced further.

Internal debate and guidance

• Greene, Lombardelli and Pill judged that a more prolonged period of policy restriction may be needed due to inflation risks.
• Bailey and Mann said they have greater confidence that rates will be cut, but that there is not yet enough evidence to act.

Updated forecasts and market pricing

• The forecast shows CPI returning to the 2% target in Q3 2026, earlier than previously expected.
• Inflation is projected at 1.7% in one year’s time and 1.8% in two years’ time, before returning to 2.0% in three years.
• Market rates imply slightly more near-term policy loosening than previously assumed, with the Bank Rate seen at 3.3% in Q4 2026.
• GDP growth is estimated at 0.2% QoQ in Q4 2025 and 0.3% QoQ in Q1 2026, with growth seen at 0.9% in 2026.
• Wage growth of around 3.25% is judged to be consistent with the 2% inflation target.

Market reaction to BoE policy announcements

Following the BoE event, GBP/USD keeps its bearish trend well in place, navigating the area of two-week lows in the 1.3560 region. Cable’s pullback also comes in tandem with the continuation of the upbeat mood in the US Dollar.

This section below was published as a preview of the Bank of England's (BoE) interest rate decision at 07:00 GMT.

• The Bank of England is expected to keep its policy rate at 3.75%.
• UK inflation figures remain well above the BoE’s target.
• GBP/USD regains part of last week’s losses, hovering around 1.3700.

The Bank of England (BoE) will deliver its first monetary policy decision of 2026 on Thursday.

Most analysts think the ‘Old Lady’ will sit tight, keeping the base rate at 3.75% after the cut delivered back on December 18. Alongside the decision, the bank will also release the Minutes, which should shed a bit more light on how policymakers weighed the arguments around the table.

Markets are firmly priced for no move this time. However, the case for further easing hasn’t gone away, even if the BoE chooses to stay patient for now, as the UK economy struggles to gain any real traction and the fiscal backdrop continues to darken.

Inflation keeps running hot

The BoE’s December rate cut was a close-run thing. The 25 basis point move, which took the bank rate down to 3.75%, was carried by a narrow 5–4 vote. Indeed, members Breeden, Dhingra, Ramsden and Taylor all backed a cut, but it was Governor Bailey’s switch that proved decisive, underlining just how finely balanced the debate around further easing has become.

The message from the guidance was still cautiously dovish but noticeably more conditional. Policymakers stuck with the idea that rates are likely to move lower over time, describing a “gradual downward path”, while making it clear that each additional cut will be harder to justify. As policy drifts closer to neutral, the room for manoeuvre is shrinking, and the judgement calls are getting tougher.

The macro backdrop allows for further easing, but not with haste. Growth momentum has faded, with the economy expected to flatline in Q4, and inflation is projected to fall back more quickly in the near term, moving closer to the target by mid-2026. At the same time, lingering inflation bumps and a labour market that is only cooling slowly argue against flagging an aggressive cut cycle.

All told, December looks less like the start of a rush to ease and more like a careful recalibration. The Bank is still edging in an easier direction, but with rising caution as rates approach neutral and decisions become ever more dependent on incoming data.

According to the BoE’s Decision Maker Panel (DMP) published on January 8, businesses are growing a touch less punchy on pay, as firms now expect wages to rise by 3.7% over the 12 months from the final quarter of 2025, a shade lower than the pace they were expecting just a month earlier.

Additionally, companies are reducing their expectations for price increases in the upcoming year, which resulted in a 0.1 percentage point decrease to 3.6% in the three months to December.

And it’s not just wages and prices. Firms have also become slightly more cautious on hiring, with expectations for employment growth over the next year softening a little, according to the survey.

How will the BoE interest rate decision impact GBP/USD?

Many people expect the BoE will keep the reference rate at 3.75% when it makes its announcement on Thursday at 12:00 GMT.

The real focus will be on how the MPC votes, since a hold is already fully priced in. If the British Pound (GBP) moves in a way that isn't expected, it could be because it suggests a change in how policymakers are getting ready for future decisions.

Pablo Piovano, Senior Analyst at FXStreet, notes that GBP/USD has come under fresh downside pressure soon after hitting yearly peaks near 1.3870 in late January, an area last traded in September 2021.

“Once Cable clears this level, it could then attempt a move to the September 2021 high at 1.3913 (September 14) ahead of the July 2021 peak at 1.3983 (July 30)”, Piovano adds.

On the other hand, Piovano says that “the critical 200-day SMA at 1.3421 emerges as the immediate contention in case sellers regain the upper hand prior to the 2026 floor at 1.3338 (January 19).”

“Meanwhile, the Relative Strength Index (RSI) near 61 suggests further gains remain in the pipeline in the near term, while the Average Directional Index (ADX) near 30 indicates a pretty strong trend,” he concludes.

• EUR/JPY trades slightly higher around 185.40, supported by the persistent weakness of the Japanese Yen.
• Mixed macroeconomic data from the Eurozone keep the outlook for the Euro cautious.
• Investors remain focused on the European Central Bank decision and the political backdrop in Japan.

EUR/JPY trades around 185.40 on Thursday at the time of writing, up 0.10% on the day. The cross is mainly supported by the underperformance of the Japanese Yen, amid rising political uncertainty in Japan, while the Euro shows a more mixed profile due to conflicting macroeconomic signals.

On the Eurozone side, the latest data have delivered contrasting messages. Eurozone Retail Sales fell by 0.5% in December, a much steeper decline than the 0.2% drop expected by market consensus. In addition, November figures were revised lower, with growth now seen at just 0.1% compared with the previously estimated 0.2%. These releases have renewed concerns about the strength of domestic demand and have limited the positive impact of other, more encouraging indicators.

At the same time, German Factory Orders surprised sharply to the upside in December, jumping by 7.8%, while markets had expected a 2.2% contraction. Upward revisions to November data further confirm a firmer momentum in Germany’s industrial sector. However, this improvement has not been enough to offset disappointment stemming from weak consumption, a key factor for the Eurozone growth outlook.

Investors are also cautious ahead of the European Central Bank (ECB) decision, due later in the day. The central bank is widely expected to keep interest rates unchanged, reinforcing its meeting-by-meeting approach. Market attention is mainly on President Christine Lagarde’s rhetoric, as the recent strength of the Euro has revived concerns about deflationary pressures. Any dovish signal could renew downward pressure on the single currency.

On the Japanese front, the Japanese Yen continues to show signs of vulnerability. Markets expect Japanese Prime Minister Sanae Takaichi to unveil a large spending budget after the lower house elections scheduled for February 8. The prospect of stronger fiscal stimulus and a widening budget deficit is weighing on the Japanese currency, even though solid demand at the recent 30-year Japanese Government Bond auction temporarily offered limited support to the JPY.

• EUR/USD remains depressed a few pips above two-week lows at 1.1777.
• Grim Eurozone Retail Sales data has offset the positive impact of German Factory Orders.
• Investors are focusing on the ECB, which is expected to hold interest rates later on Thursday.

The Euro (EUR) depreciates for the second consecutive day against the US Dollar (USD) on Thursday, trading around 1.1790 at the time of writing, only a few pips above two-week lows, at 1.1777. Mixed Eurozone data has failed to lift the Euro, and the focus shifts now to the European Central Bank's (ECB) monetary policy decision.

Earlier on the day, a larger-than-expected decline in the Eurozone's retail consumption offset the moderate optimism triggered by upbeat German Factory Orders, while a moderate risk-averse sentiment is underpinning support for the USD.

Data from the US was also mixed on Wednesday. The ISM Services Purchasing Managers' Index showed better-than-expected results, but the employment sub-index disappointed, increasing concerns about the labour market, as the ADP Employment Change report showed a poor net job creation in January.

The ECB is widely expected to leave monetary policy unchanged at 13:15 GMT on Thursday. In the US, Initial Jobless Claims and the JOLTS Job Openings will attract particular attention, following Wednesday's downbeat ADP Employment figures.

Daily Digest market Movers: All eyes are on the ECB

• The Euro remains on the defensive on Thursday, ahead of the ECB's interest rate decision. The central bank will, almost certainly, leave borrowing costs on hold, but investors will be attentive to changes in the rhetoric, as the recent Euro strength is raising concerns about potential deflationary effects. Any dovish hint might send the Euro to fresh lows.
• Earlier on Thursday, Eurozone Retail Sales showed a 0.5% contraction in December, well beyond the 0.2% ciontraction anticipated by market analysts. Furthermore, November's sales have been revised down to a 0.1% growtgh from the 0.2% previously estimated.
• These figures have offset the positive impact of German Factory Orders, which jumped 7.8% in December, against expectations of a 2.2% contraction. In November, industrial orders rose 5.7%, revised up from 5.6%.
• In the US, the ISM Services PMI confirmed that business activity kept expanding at a solid pace in January, with the index showing a steady 53.8 reading, against market expectations of a mild slowdown to 53.5. The strong activity, however, is not boosting demand for labour, as the Employment Index eased to 50.3 from 51.7 in December.
• Previously, the US ADP Employment Change report had raised alarms about the health of the labour market. Data from January revealed that private sector employment rose by a mere 22K, well below the market consensus of 48K, while December's reading was revised down to 37K from previous estimations of 41K.
• Later on the day, Eurozone Retail Sales are expected to show a 0.2% contraction in December, offsetting the previous month's 0.2% increase.
• In the US, Initial Jobless Claims are expected to show an increase to 212K in the week of January 30, up from 209K in the previous one
• Later on, the US JOLTS Job Openings are forecast to show a mild increase to 7.2 million in December, from 7.146 million vacancies in November.

Technical Analysis: EUR/USD remains pinned near the 1.1775 resistance area

The EUR/USD pair consolidates losses with support at 1.1775 in the bears' focus. The Moving Average Convergence Divergence (MACD) histogram is practically flat, highlighting a neutral momentum, but the Relative Strength Index (RSI) wavers near 40, indicating a bearish-leaning tone.

A confirmation below the mentioned 1.1775 area (February 2, 3 lows) opens the path towards the January 23 low, at 1.1728, and the January 22 low, at 1.1670. On the upside, immediate resistance is at Wednesday's high, near 1.1840, and the previous support area, near 1.1900 (close to January 28, 29, and 30 lows).

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

• EUR/GBP jumped to fresh weekly highs above 0.8700 following BoE's monetary policy decision.
• The BoE kept rates on hold, with four committee members voting for a rate cut.
• The ECB might deliver another dovish hold later on Thursday.

The Euro (EUR) is drawing support for a weaker British Pound (GBP) on Thursday, following a dovishly tilted monetary policy decision by the Bank of England (BoE). The pair has jumped to a fresh one-week high beyond 0.8700, from the 0.8660 area.

The Bank of England left its Repo Rate unchanged at 3.75%, as widely expected, but the voting has shown a split Monetary Policy Committee (MPC), with four policymakers calling for a rate cut, against market expectations of only two dovish dissenters.

Beyond that, the bank’s statement affirms that the risks from greater inflation persistence are becoming less pronounced, leaving the door open for further monetary easing down the road, which has sent the Pound tumbling against its main peers

In the Eurozone, the focus is on the European Central Bank’s (ECB) monetary policy decision, due later today. The ECB is widely expected to leave its benchmark interest rate unchanged at 2%. The risk for the Euro, however, is skewed to the downside with some ECB voices flagging the possibility of a rate cut, as Euro strength is threatening to trigger deflationary effects in the economy. Any hint in that direction might push the Euro lower.

• The European Central Bank is widely anticipated to keep interest rates on hold.
• ECB President Lagarde is likely to reiterate the meeting-by-meeting approach.
• EUR/USD remains stable above 1.1800, with buyers looking to return.

The European Central Bank (ECB) is holding its two-day meeting and will announce its monetary policy decision on Thursday. The ECB is widely expected to keep interest rates on hold for the fifth consecutive meeting, leaving the main refinancing operations, the marginal lending facility, and the deposit facility at 2.15%, 2.4%, and 2%, respectively.

Additionally, ECB President Christine Lagarde will hold a press conference afterward to explain policymakers’ reasoning behind the decision.

Ahead of the announcement, the EUR/USD pair trades above the 1.1800 mark, stabilizing after retracing sharply from January’s peak at 1.2082.

What to expect from the ECB interest rate decision?

The ECB is in a good position and plans to remain there, refraining from any further monetary policy action. The ECB was among the first major central banks to cut rates after post-pandemic inflation peaks that drove multi-decade highs in rates. President Christine Lagarde's latest mantra has been that monetary policy is in a “good place,” and is expected to repeat the message.

The Governing Council decided to keep rates unchanged at its December meeting, offering no fresh clues about future action. As ING noted, “The minutes of the ECB’s December meeting confirm the ECB’s wait-and-see stance in a macro environment, in which the base case looks very benign, but risks remain unusually high.”

In the meantime, macroeconomic data released in the last couple of months confirm officials’ stance. The Euro area economy has not only been resilient but is finally showing signs of improvement.

According to the latest Eurostat data, the European Union (EU) grew by 0.3% quarter-on-quarter in the three months to December, while the 2025 Gross Domestic Product (GDP) grew by 1.6% year-on-year.

In the meantime, inflation cooled down in January, as expected. Eurostat reported that the Harmonized Index of Consumer Prices (HICP) rose 1.7% in the year to January as expected, while easing from the 1.9% posted in December. The core HICP, which excludes volatile components such as food or energy, rose by 2.3% as anticipated, matching the previous month’s figure.

Finally, it is worth remembering that, speaking after the ECB’s final Governing Council meeting, President Lagarde made it clear that, given that monetary policy is in a “good place,” this does not imply a fixed or predictable path for rates. She also emphasised the ECB’s meeting-by-meeting approach.

In this scenario, the upcoming monetary policy decision is likely to be a non-event. The general consensus is that the ECB will maintain its hawkish stance and that President Lagarde will repeat the message that the ECB is in wait-and-see mode, attentive to economic developments without a pre-set monetary path.

How could the ECB meeting impact EUR/USD?

As previously noted, the EUR/USD pair is stable above 1.1800 ahead of the announcement, following volatile price action over the previous two weeks. The EUR/USD pair also trades roughly 300 pips below its recent peak, yet retains most of its 2025 gains.

Valeria Bednarik, FXStreet Chief Analyst, notes: “Technically speaking, the EUR/USD pair bearish case seems well-limited. In the daily chart, the pair holds well above all its moving averages, with a bullish 20-day Simple Moving Average (SMA) heading north above the 100 and 200 SMAs while providing support at around 1.1760. At the same time, technical indicators have picked up after nearing their midlines, presenting uneven upward strength at the time of writing.”

Bednarik adds: “The EUR/USD pair bottomed at around 1.1775 earlier in the week, making the 1.1760-1.1770 area the immediate downward barrier. A slide below the level exposes the 1.1700 threshold, en route to the 1.1640 price zone. Bulls will be looking for a recovery beyond 1.1920 to add longs, aiming for a test of the 1.2000 mark.”

According to TD Securities, the European Central Bank is anticipated to keep the deposit facility rate at 2.00% with no significant changes in its communication. The report highlights that geopolitical tensions and market volatility may introduce uncertainty, but the ECB's stance will likely focus on balanced risks.

ECB's steady approach amid uncertainty

"We expect the ECB to remain on hold at 2.00%, with little shift in tone of message."

"Though geopolitical tensions and recent market volatility will likely bring the subject of uncertainty back into the discussion, the press statement and conference will continue to lean on balanced risks and a 'well-positioned' monetary policy."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• The Pound Sterling slumps against its major currency peers after the BoE’s monetary policy announcement.
• The BoE leaves interest rates unchanged at 3.75%, with a 5-4 split.
• Investors expect the Fed to maintain the status quo in the next two policy meetings.

The Pound Sterling (GBP) extends its decline against its major currency peers on Thursday, following the Bank of England’s (BoE) monetary policy announcement. The British currency has fallen further as five out of nine Monetary Policy Committee (MPC) members have voted to hold interest rates steady at 3.75%, against two expected.

BoE MPC members: Swati Dhingra, Alan Taylor, Sarah Breenden, and Dave Ramsden advocated for another interest rate cut of 25 basis points (bps).

The BoE has reiterated its "graudual monetary easing" outlook, but refrain from providing any timeframe for next interest rate cut. "All is going well, there should be scope for some further reduction in the bank rate this year," as per monetary policy statement.

In the last policy meeting in December, the BoE slashed interest rates by 25 bps to 3.75%, and guided that the monetary policy will remain on a "gradual downward path"

Daily Digest Market Movers: Investors await US JOLTS Job Openings data for December

• The Pound Sterling trades 0.60% lower to near 1.3570 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair weakens as the Pound Sterling underperforms and the US Dollar extends its rally amid firm speculation that the Federal Reserve (Fed) will hold interest rates steady for another two meetings ahead.
• The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh over-a-week high at 97.82.
• Traders seem confident that the Fed will keep interest rates unchanged in the range of 3.50%-3.75% in its policy meetings in March and April, according to the CME FedWatch tool
• Fed dovish projections have cooled as inflationary pressures remain well above the central bank's 2% target, and the impact of recent interest rate cuts is yet to pass through the economy.
• On the economic data front, investors shift focus to the US JOLTS Job Openings data for December, which will be published at 15:00 GMT. US employers are expected to have posted 7.2 million fresh jobs, higher than the previous reading of 7.146 million.
• In Thursday’s session, investors will also focus on the European Central Bank’s (ECB) monetary policy announcement at 13:15 GMT. The ECB is also expected to leave borrowing rates unchanged, as various officials have expressed that monetary adjustments are not required unless there is a dramatic change in inflation and employment.

Technical Analysis: GBP/USD extends declines slightly below 20-day EMA

GBP/USD trades lower at around 1.3570 as of writing. The price slides below the rising 20-day Exponential Moving Average (EMA) at 1.3601, keeping the short-term bias oriented higher. While, the 20-day EMA has been ascending, the overall trend is still favoring the upside.

The 14-day Relative Strength Index (RSI) at 50 (neutral) has eased from prior overbought readings, indicating bullish momentum has cooled.

Momentum would improve if the price continues to hold above the average, and pullbacks would be supported on first tests of the 20-day EMA at 1.3601. A break below that barrier could shift the bias lower and expose a deeper retracement towards the psychological level of 1.3500. Looking up, the February 4 high of 1.3733 and the four-year high of 1.3870 will be key barriers.

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