GBP/USD remains steady at approximately 1.3695 during the early Asian session on Monday. Anticipations regarding Warsh’s stance being more hawkish compared to other possible candidates may support the US Dollar. The Bank of England is expected to maintain the key interest rates at their current levels during the upcoming meeting on February 5. The GBP/USD pair remains steady around 1.3695 in the early Asian session on Monday. Market participants consider the potential implications of a Federal Reserve led by Kevin Warsh. The US ISM Manufacturing Purchasing Managers Index report is set to be released later on Monday.
US President Donald Trump appointed Kevin Warsh to head the US central bank. Markets expect Warsh to favor a reduced Fed balance sheet and maintain elevated interest rates for an extended period, which offers some backing to the US Dollar relative to the Pound Sterling.
“The market response to Donald Trump’s nomination of Kevin Warsh for the next Fed Chair aligns with our perspective that the president has opted for a relatively secure selection,” stated John Higgins. “The perception appears to be that Warsh is not someone who is firmly aligned with the president and that he won’t contribute to a further erosion of the Fed’s independence and concerns about currency debasement,” Higgins noted.
The financial markets expect the Bank of England to maintain the interest rates at 3.75% during its February meeting. This expectation comes after UK inflation data exceeded forecasts and Retail Sales figures showed robust performance. As reported, nearly all economists surveyed anticipate that the UK central bank will maintain its benchmark interest rate at 3.75% during the February meeting. A slight majority is now predicting a decrease to 3.50% in March, influenced by a recent slowdown in positive economic developments. The anticipation of gradual rate reductions by the BoE may strengthen the Cable versus the USD in the short term.