The GBP/USD exchange rate has fallen from last week's one month high, in response to the Bank of England's particularly moderate interest rate decision.

The GBP/USD exchange rate closed at 1.2398 last week, up about 0.3% from the opening level but down about 0.8% from the highest level.

At the beginning of last week, the performance of the pound surpassed many other currencies. Although currencies such as the euro have been impacted by Trump's tariff threat, the pound has received support as the US President has stated that the trade agreement with the UK may be "resolved".

Due to the downward revision of the service sector PMI final value in January, the pound exchange rate remained volatile in the middle of last week.

After the Bank of England announced its first interest rate decision of the year, the pound faced significant selling pressure in the second half of last week.

Although the market generally expects the Bank of England to cut interest rates by 25 basis points, the overall outlook of the bank has made the market uneasy.

In addition to halving the UK economic growth forecast for 2025, the Bank of England's Monetary Policy Committee (MPC) has also shown clear dovish divisions, with several members advocating for more aggressive easing policies and hinting at the possibility of further interest rate cuts.

Due to Trump's inconsistent tariff stance on Mexico and Canada, the US dollar experienced significant fluctuations in the first half of last week.

As President Trump pushed forward tariffs, the US dollar initially soared, but almost immediately reversed after he agreed to postpone the tariffs.

As concerns about the trade war ease and the January slowdown of the Institute for Supply Management (ISM) services PMI is greater than expected, the US dollar has been on the defensive throughout the middle of last week.

Due to investors' preference for this safe haven currency, the deterioration of market sentiment helped the US dollar recover some of its losses as it entered the second half of the week.

The latest non farm payroll report released by the United States injected additional volatility into the US dollar, as despite the lower than expected number of new jobs added in January, the unemployment rate actually decreased.

Looking ahead to the next week, the key catalyst for the trend of the pound dollar exchange rate will be the release of the latest US CPI. Another stronger than expected inflation data may further weaken the expectation of the Federal Reserve's upcoming interest rate cut, driving the US dollar higher. At the same time, pound investors will focus on the latest GDP data from the UK. If economic growth stagnates again in the fourth quarter of 2024, it may raise concerns about stagflation and weaken the popularity of the pound.