• The Pound Sterling performs stronger against the US Dollar as markets widely expect the Fed to deliver two interest-rate cuts this year.
• Investors expect that the BoE will start reducing key rates in August.
• Investors will focus on the US core PCE inflation data for May this week.

The Pound Sterling (GBP) performs relatively stronger against most currencies, except for the Japanese Yen (JPY) and the Australian Dollar (AUD) in Tuesday’s London session. The British currency remains upbeat amid uncertainty about when the Bank of England (BoE) will start cutting interest rates. 

Market expectations indicate that the BoE will announce a cut in interest rates in August, the first one since the Covid-19 pandemic hit. Speculation for BoE rate cuts in August has strengthened as policymakers signaled in the latest policy meeting that they are closer to starting to roll back their restrictive interest rate stance. 

BoE Governor Andrew Bailey said in the monetary policy statement that the decision to keep interest rates unchanged at 5.25% in the last meeting was “finely balanced”. Seven officials voted to keep key rates steady while policymakers Swati Dhingra and Deputy Governor Dave Ramsden voted for a rate cut.

The BoE said the return of the annual headline inflation to the bank’s target of 2% is welcome news. However, it is still not enough for rate cuts. BoE policymakers remain worried about stubborn wage inflation, which is posing upside risks to price pressures in the service sector.