Sterling steadies after three-day fall as investors pause following dovish data

By Niket Nishant

LONDON, Feb 19 (Reuters) - Britain's pound held steady against the dollar on Thursday, stabilising after three consecutive days of losses as investors took a breather following the release of economic data that bolstered the case for further interest rate cuts.

Sterling GBP=D3 was largely unchanged at around $1.3483. It touched $1.34816 earlier in the session, its lowest level in nearly a month.

The currency has been weighed down by weak economic data this week.

The UK's jobless rate rose to 5.2% in the fourth quarter of last year, compared with 5.1% in the three months prior, data showed on Tuesday, adding to bets that the Bank of England would likely lower interest rates soon.

Wage growth, excluding bonuses, also slowed, while dovish expectations gained further steam after data on Wednesday showed inflation in January hit its lowest level since March 2025.

"Our economists turned more confident in their base case of a 25 basis points cut in March followed by one additional cut in June, as the previously highlighted upside risks appear to have diminished," BofA analysts said in a note.

Money markets price in roughly an 80% chance of a 25-bps rate cut at the BoE's March meeting, while a cut is fully priced by April.

While sterling steadied against the dollar and was down just 0.1% against the euro at around 87.39 pence EURGBP=, analysts anticipated further weakness.

EPSTEIN FILES CREATE POLITICAL TURMOIL, ANDREW ARRESTED

Investors are also contending with political uncertainty.

The BBC reported on Thursday that police had arrested King Charles' younger brother Andrew Mountbatten-Windsor on suspicion of misconduct in public office over his links to Jeffrey Epstein.

The Epstein files have also piled pressure on Prime Minister Keir Starmer's government, after they showed emails highlighting ties between Epstein and Peter Mandelson, the former British ambassador to the United States.

Starmer refused to heed calls to quit earlier this month, and messages of support from top ministers and some potential leadership rivals eased market jitters.

"PM Starmer is still seen as vulnerable. The pound should continue to face depreciation episodes whenever Starmer's political position deteriorates," said ING FX strategist Frantisek Taborsky.

Traders at prediction markets platform Polymarket see a 47% chance of Starmer quitting by June 30. On Kalshi, the odds stand at 50%.