Sterling under pressure ahead of Bank of England's parliamentary hearing

Sterling fell in European trade on Tuesday against a basket of major rivals, extending losses for the second straight session against the dollar on expectations that the Bank of England might cut interest rates sooner than the Federal Reserve. 

Now investors await a Parliamentary hearing for Bank of England officials later today on monetary policies to gather more clues about the future. 

GBP/USD

GBP/USD fell 0.2% to 1.2579, with a session-high at 1.2598, after closing down 0.1% on Monday, the first loss in three days on thin trading. 

UK Rates

Recent UK inflation and growth data is raising the odds for an early UK interest rate cut in May.

Markets are now expecting a 15% chance of a UK interest rate cut in March, and a 50% chance for such a cut in May. 

Overall, traders now expect 71 basis points of total UK rate cuts in 2024, down from 134 basis points in previous forecasts.

Hearing Session

As of 10:15 GMT, the UK Parliament will hold a monetary policy hearing session with Bank of England policymakers, which could provide clues on the future path of policies. 

The BOE said following its last policy meeting, that it expects consumer prices to hit the 2% target in the second quarter of 2024 before rising once more in the third and fourth quarters. 

BOE Governor Andrew Bailey said that it won’t be “mission accomplished” if inflation returned to 2% in April, as pressures from services prices are still ongoing. 

He asserted the need to see more evidence of the slowdown of consumer prices towards the 2% target before cutting interest rates.