Sterling lost ground in European trade on Friday against major rivals, and moved away from a two-month high against the dollar on active profit-taking. 

Despite the decline, the pound is still heading for the third weekly profit in a row on renewed inflationary pressures on the Bank of England policymakers, which hurt the odds of a BOE March interest rate cut.

Now traders await important UK data on retail sales and other major sectors in the economy later today.

The Price 

The GBP/USD fell 0.15% today to $1.2654, with December 18 highs at $1.2674.

The pair rose 0.7% on Thursday, resuming gains as the risk appetite improved.

Weekly Trades

The British pound is up 0.55% so far this week on the dollar, on track for the third weekly profit in a row.

UK Rates

Earlier London data showed wages grew in December by the fastest pace in 13 months, however, Bank of England Governor Andrew Bailey still expressed confidence that inflation will continue to slow down this year.

Additional data showed UK main and core consumer prices rose past estimates in January.

Following the data, the odds of a BOE interest rate cut in March fell from 75% to 60%.

The futures market is betting on 54 basis points of total UK interest rate cuts this year, down from 65 basis points in previous forecasts.

The Japanese yen fell in Asian trade on Friday away from an 11-week high against the dollar on active profit-taking.

The yen is still heading towards weekly profits, buoyed by the outlook of policy normalization by the Bank of Japan this year.

Earlier data released today showed Tokyo’s inflation accelerated to 19-month highs, increasing inflationary pressures on the central bank.

The Price

The USD/JPY pair rose 0.75% today to 150.73 yen per dollar, with December 3 lows at 149.27.

The pair closed up 1.2% yesterday against the dollar, marking the biggest profit in 2025 on bullish remarks from several BOJ officials.

Weekly Trades

The yen is up 1.1% so far this week on track for the fifth weekly profit in six weeks, and on hopes for a reduction in the Japan-US interest rate gap.

Core Inflation

Earlier Tokyo data showed core consumer prices rose 3.2% in January, the best pace since July 2023, and beating estimates of 3.1%.

Japanese Rates

Bank of Japan member Hajimi Takata asserted the importance of gradual interest rate hikes to contain the risks of inflation, which is approaching the 2% target.

BOJ Vice Governor Riyuzu Himuno said the path of monetary policies will depend on data, especially wages growth in both 2024 and 2025.

Recent data showed Japan’s GDP growth accelerated in the fourth quarter of last year, in turn raising pressures on BOJ policymakers.

Following the data, the odds of a BOJ March interest rate hike rose by 0.25% at the March meeting to 80%.

Gold prices rose on Thursday as the dollar dipped against a basket of major rivals, with the precious metal hitting record highs.

According to Swiss customs data, Swiss gold exports to the US amounted to 192.9 tons in January, the highest since 2012, and up from 64.2 tons in December. 

Official US data showed unemployment claims rose by 5 thousand to 219 thousand last week, while analysts expected just a thousand increase.

The recently released Federal Reserve’s meeting minutes concerns among members about US President Trump’s new tariffs and their impact on inflation, in addition to the policies about tax cuts and immigration.

Fed members considered the possibility of factors impeding further progress in bringing inflation towards 2%, including tariff and immigration policies.

However, Fed officials agreed that recent economic gauges indicated brisk growth, while unemployment settled at months-lows. 

Fed members will continue to monitor incoming data and will intervene with any necessary decisions if needed.

Otherwise, the dollar index fell 0.7% as of 20:55 GMT to 106.3, with a session-high at 107.1, and a low at 106.3.

On trading, gold spot prices rose 0.5% as of 20:58 GMT to $2952.2 an ounce.

The Energy Information Administration reported a buildup of 4.6 million barrels in US crude stocks last week to a total of 432.5 million barrels, while analysts expected a build of 3.2 million barrels. 

Gasoline stocks fell 0.2 million barrels to 247.9 million barrels, while distillate stocks fell by 2.1 million barrels to 116.6 million barrels.