The GBP/USD pair inched higher after three days of losses, trading around 1.3310 during Friday’s Asian session. The Pound Sterling (GBP) finds support amid cautious sentiment surrounding the Bank of England’s (BoE) monetary policy stance.
BoE signals extended restrictive policy
BoE policymaker Catherine Mann said on Thursday that monetary policy must remain restrictive for longer to foster a stable growth environment. She added that “inflation remains persistent and the outlook for growth remains modest,” according to Reuters.
UK Chief Secretary to the Treasury James Murray emphasized that agencies will not be allowed to use emergency funds for pay rises, aiming to contain the wage spiral. “This prudent but tough approach to public spending is what will help build a stable economy,” Murray said.
USD dynamics add mixed pressure
The US Dollar (USD) could provide headwinds for GBP/USD due to heightened risk aversion amid the ongoing government shutdown, as the Senate remains deadlocked on funding legislation.
However, dovish sentiment surrounding the US Federal Reserve (Fed) limits USD strength. San Francisco Fed President Mary Daly noted that inflation has been much lower than expected, and projected further rate cuts for risk management. Meanwhile, Fed Governor Michael Barr highlighted that the current outlook complicates policy decisions but reaffirmed that the September rate cut was appropriate, with rates still modestly restrictive. He also cautioned that it is too early to assess the shutdown’s impact on the broader economy.
