Sterling Holds Near One Month Low as Markets Await Bank of England Governor’s Remarks

The British pound remained close to a one month low on Tuesday as investors adopted a cautious stance ahead of testimony from Bank of England Governor Andrew Bailey and continued to assess the global impact of new United States tariffs.

Sterling was trading around 1.3489 against the dollar, hovering near its weakest level in four weeks. It was largely steady against the euro, with the single currency changing hands at approximately 87.34 pence. Currency markets have seen muted movement in recent sessions, reflecting uncertainty over both domestic monetary policy and international trade developments.

Bailey is scheduled to appear before Parliament’s Treasury Committee later in the day, where he is expected to provide further clarity on the Bank of England’s recent decision to keep interest rates unchanged. Earlier this month, the Monetary Policy Committee voted to hold the benchmark rate steady following a closely divided decision, underscoring differing views among policymakers on the pace of economic cooling.

Financial markets are currently pricing in two interest rate cuts this year, which would bring the base rate down to around 3.25 percent. However, the timing of those potential reductions remains uncertain. Economists have pointed to mixed economic signals, including softer inflation data and a slight rise in unemployment, as factors that could influence the central bank’s approach in the months ahead.

January inflation figures showed price growth easing to its lowest level since March of the previous year, strengthening expectations that borrowing costs could be reduced if disinflation continues. At the same time, labor market data indicated that the unemployment rate edged higher in the final quarter of 2025, suggesting some cooling in economic activity.

Analysts note that any indication from Bailey that policymakers are open to a near term rate cut could push sterling lower, as currency values often decline when interest rate expectations fall. Conversely, a more cautious tone emphasizing persistent inflation risks might provide some support to the pound.

Beyond domestic policy considerations, investors are also watching developments in Washington. A new ten percent global import tariff introduced by the United States came into effect at midnight, with further increases potentially under consideration. The prospect of higher trade barriers has added another layer of volatility to global markets and weighed on risk sensitive assets.

Political factors are also contributing to investor unease. A by election in the Manchester constituency of Gorton and Denton later this week is seen as a test for Prime Minister Keir Starmer and his Labour government amid shifting polling numbers.

As markets await Bailey’s testimony, traders remain focused on signals that could shape the trajectory of UK monetary policy and determine whether sterling stabilizes or extends its recent slide.