Sterling fell in European trade on Tuesday against a basket of major rivals, extending losses for the fourth straight session against the dollar and almost touching five-month lows and trading below $1.23 for the first time since November 2023 on rate cuts outlook by the BOE.

The markets expect the Bank of England to cut interest rates starting June, which would widen the rate gap with the US.

Now investors await important UK manufacturing and services data to gather more clues on the future of UK rates.

The Price

The GBP/USD pair fell 0.15% today to $1.2332, with a session-high at $1.2359.

The pair closed down 0.2% on Monday, the third loss in a row, plumbing five-month lows at $1.2299.

UK Rates

Theres now a 50% chance of a BOE interest rate cut in June, and a 100% chance of such a cut in August.

UK Inflation Outlook

Bank of England Andrew Bailey said last week theres nothing in inflation data that should raise concerns.

Bailey expects upcoming inflation numbers to register a steep drop, reiterating his belief that Europe and the UK are facing less of an inflation threat than the US.

Interest Rate Gap

The current US-UK interest rate gap stands at 25 basis points, and will likely increase to 50 basis points in June as the BOE is expected to cut rates while the Fed is estimated to hold them.