The Pound Sterling (GBP) remained stable against major currencies as the market awaits guidance on the Bank of England’s (BoE) monetary policy this year. The BoE recently cut its key borrowing rates by 25 basis points to 4.5%, indicating a gradual easing approach.

Member Swati Dhingra expressed her support for a faster monetary expansion cycle due to ongoing weak demand. She cautioned that maintaining a gradual approach could leave monetary policy too restrictive by the end of 2025.

GBP/USD declined after reaching a multi-month high, trading quietly below 1.2650 with waning bullish momentum. Early market optimism hindered demand for the US Dollar, impacting the GBP/USD pair.

This means there is uncertainty in the market regarding the direction of monetary policy. The Bank of England has started lowering interest rates, but the pace at which it continues is still unclear. Swati believes that cutting rates too slowly could hold back economic growth, as demand remains weak. If borrowing costs stay high for too long, businesses and consumers may struggle, potentially slowing the economy more than necessary.

Meanwhile, traders have seen the Pound pull back from recent highs against the US Dollar. The initial enthusiasm around the currency faded as the financial markets digested economic data and global sentiment. At the same time, the US Dollar has lacked strength, making currency movements less one-sided.

Monetary policy expectations will shape price action over the coming days. If data suggests that inflation in the UK is falling faster than anticipated, pressure could grow for the Bank of England to cut rates again sooner. That might weigh on the currency. On the other hand, if economic data remains stronger than expected, we could see the markets question whether the central bank is easing too soon. That scenario could provide a floor for the Pound.

What Andrew Bailey and his colleagues say in the coming weeks will be closely examined. Any suggestion that they are reconsidering the pace of rate cuts could shift sentiment quickly. On the other hand, if more policymakers echo Swati’s argument, the expectation for rate cuts could accelerate.

For now, traders will need to watch technical levels closely. The recent rally in GBP/USD has slowed, and whether it holds above key support could determine near-term direction. If bearish pressure builds and the pair breaks key areas, further declines could follow. If it stabilises above recent lows, we might see another push higher, particularly if US Dollar weakness returns.