Pound Slides Amid BoE Rate Cut Speculation

The British pound weakened against most major currencies in the European session on Thursday, in the wake of dovish comments from BoE's Bailey about rate cuts.

In an interview, the Bank of England Governor Andrew Bailey said market expectations for rate cuts this year are not unreasonable. About the inflation outlook, Bailey said "We are not seeing a lot of sticky persistence."

Also, data released earlier today showed the U.K. economy contracted in the fourth quarter, as initially estimated.

Gross domestic product fell by unrevised 0.3 percent after a 0.1 percent drop in the third quarter, according to final data from the Office for National Statistics.

The statistical office thus confirmed a technical recession towards the end of 2023. Consequently, the economy grew only 0.1 percent in 2023, much weaker than the 4.3 percent expansion seen in 2022.

The British sterling held steady against its major rivals in the Asian session today.

In the European session now, the pound fell to a 6-day low of 1.2586 against the U.S. dollar and a 3-day low of 190.57 against the yen, from early highs of 1.2637 and 191.26, respectively. If the pound extends its downtrend, it is likely to find support around 1.25 against the greenback and 188.00 against the yen.

Against the Swiss franc, the pound slid to 1.1399 from an early high of 1.1439. The pound may test support near the 1.12 region.

Looking ahead, Canada GDP for January, U.S. PCE price index for February, U.S. GDP data for the fourth quarter, U.S. pending home sales data for February, U.S. weekly jobless claims, U.S. University of Michigan's consumer sentiment for March and U.S. Baker Hughes oil rig count data are slated for release.