Sterling Consolidates Ahead of the Bank of England Decision

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Sterling is consolidating as markets await the Bank of England’s interest rate decision, while investors’ attention is gradually turning to tomorrow’s meeting of the Bank of Japan. The UK currency is moving cautiously, as markets have largely priced in a 25-basis-point cut in the Bank Rate to 3.75% at today’s meeting. Expectations of easing strengthened after UK inflation unexpectedly slowed to 3.2% in November — the lowest level in recent months and below analysts’ forecasts.

Market pricing implies an almost 100% probability of a rate cut, with some participants also factoring in the possibility of further adjustments in 2026 if inflation and labour-market data continue to weaken.

GBP/USD is fluctuating within a narrow range ahead of the announcement, reflecting a balance between pressure on the pound from expected monetary easing and broader market caution before the BoE decision. Consolidation is also evident in GBP/JPY, although the pair remains above key levels around 208.00. Traders are staying cautious ahead of tomorrow’s Bank of Japan meeting, where most forecasts point to a potential 25-basis-point rate hike to 0.75% — a move that would mark a significant shift in Japanese policy.

Such expectations are supported by recent economist surveys and signs of firmer business sentiment and inflation pressures. A BoJ hike would add further pressure on sterling versus the yen, as higher Japanese yields make the currency more attractive.

GBP/USD

After a solid rally over the past three weeks, GBP/USD has lost upward momentum and moved into a range between 1.3300 and 1.3450. Technical analysis points to a possible pullback towards the 1.3240–1.3300 area, as a bearish engulfing pattern has formed on the daily chart. A decisive break and hold above 1.3450 would open the way for a test of the key 1.3500 level.

Key events for GBP/USD:

  • today at 15:00 (GMT+3): Bank of England interest rate decision;
  • today at 15:30 (GMT+3): speech by BoE Governor Andrew Bailey;
  • today at 16:30 (GMT+3): US Consumer Price Index (CPI).

GBP/JPY

GBP/JPY is consolidating within the 207.00–208.40 range. A piercing line pattern has formed on the daily timeframe, which could support a retest of recent highs near 209.00. A break below support at 207.00 may trigger a deeper corrective move.

Key events for GBP/JPY:

  • tomorrow at 02:30 (GMT+3): Japan nationwide core CPI;
  • tomorrow at 06:00 (GMT+3): Bank of Japan interest rate decision;
  • tomorrow at 10:00 (GMT+3): UK core retail sales index.