Pound Sterling Strengthens as Traders Sell BoE Dovish Positions

Pound Sterling Strengthens as Traders Sell BoE Dovish Positions

The Pound Sterling (GBP) showed strength on Tuesday, climbing to around 1.3550 against the US Dollar (USD) amid ongoing uncertainty over the US economic outlook. Market participants are increasingly closing out dovish positions on the Bank of England (BoE) following a series of strong UK economic reports.

Traders now expect the BoE's monetary easing to be moderate, in contrast to fears of aggressive rate cuts. According to Reuters, futures markets suggest borrowing costs could decrease by approximately 38 basis points by the end of the year, reflecting the possibility of one 25 basis point cut and over a 50% chance of a second.

This shift in sentiment is supported by robust UK economic data, including better-than-expected first-quarter GDP growth, a higher-than-anticipated Consumer Price Index (CPI), and strong retail sales figures for April. Meanwhile, concerns persist in the US, with Federal Reserve’s Kashkari warning about stagflation risks under President Trump’s administration.

As traders recalibrate their expectations for BoE policy, the Pound Sterling continues to outperform many of its peers, reflecting growing confidence in the UK economy’s resilience.